How does the Consolidated Appropriations Act of 2023 affect employers?

The Consolidated Appropriations Act of 2023 was signed by President Joe Biden on Dec. 29, 2022. The act includes several provisions affecting employers, with major provisions listed below.

Pregnant Workers Fairness Act (PWFA)

Effective June 27, 2023, the PWFA requires employers with 15 or more employees to provide reasonable accommodations for job applicants and employees with known limitations related to pregnancy, childbirth and related medical conditions. Reasonable accommodations must be made unless the accommodation would impose an undue hardship on the employer's business operations. The terms ''reasonable accommodation'' and ''undue hardship'' have the same meanings as under the Americans with Disabilities Act (ADA).

The term ''known limitation'' means a "physical or mental condition related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions that the employee or employee's representative has communicated to the employer whether or not such condition meets the definition of disability specified in section 3 of the Americans with Disabilities Act."

Reasonable accommodations might include using a stool, taking extra bathroom breaks, keeping a water bottle nearby and being relieved from heavy-lifting duties. Employers may not require an employee to take paid or unpaid leave if another reasonable accommodation can be provided.

Additionally, employers may not require any accommodation other than a reasonable accommodation arrived at through the interactive process as described in the ADA.

An employer may not take adverse action in the terms, conditions or privileges of employment against a qualified applicant or employee requesting or using such reasonable accommodations.

The U.S. Equal Employment Opportunity Commission (EEOC) published proposed regulations to implement the PWFA on Aug. 11, 2023. Comments regarding this proposal must be submitted no later than Oct. 10, 2023, and final regulations are expected by Dec. 29, 2023. While the proposed regulations may be helpful for employers in understanding how the EEOC is currently interpreting the PWFA, they cannot be relied upon until regulations are finalized.

Providing Urgent Maternal Protections for Nursing Mothers (PUMP) Act

The PUMP Act, which took effect Dec. 29, 2022, expands workplace lactation accommodations for nursing employees that were first established by the Break Time for Nursing Mothers law, passed in 2010 under the Affordable Care Act and amending the Fair Labor Standards Act (FLSA). Expanded rights to sue for monetary remedies will become effective April 28, 2023.

The prior law excluded most exempt employees from coverage, but the PUMP Act rectifies that by expanding coverage to all employees needing to express and store breast milk at work.

Nonexempt employees who are not completely relieved from duty while taking a break as allowed under the act must be paid for that time. Exempt employees cannot have their pay deducted for these breaks.

Railway and motor coach operators and air carriers are covered under the law, but with exceptions and/or delayed effective dates for certain employees.

Employers with fewer than 50 employees may still be exempt if compliance would cause an undue hardship.

The U.S. Department of Labor has issued a fact sheet, FAQs and a sample presentation to assist employers in complying with the law.

Telehealth Benefits

Employers will have the option to provide pre-deductible coverage of telehealth services for employees with high-deductible health plans (HDHPs) for another two years (ending Dec. 31, 2024) through an extension of the 2020 Coronavirus Aid, Relief and Economic Security (CARES) Act.

The provision allows health savings account (HSA)-qualifying HDHPs to cover telehealth and other remote-care services on a pre-deductible basis. Additionally, an otherwise HSA-eligible individual can receive pre-deductible coverage for telehealth and other remote-care services from a stand-alone vendor outside of the HDHP. In both cases, the pre-deductible telehealth coverage won't hinder an individual's eligibility to make or receive HSA contributions.

Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022

These provisions are intended to build upon the SECURE Act of 2019, incentivizing employers to offer retirement benefits while also improving retirement outcomes for employees. There are approximately 90 retirement-related provisions with various effective dates in the act to be discussed with your legal counsel. Some highlights for employers are listed below.

Required minimum distribution (RMD) age (Sec. 107): Previously set at 72 years of age, the age at which distributions from retirement accounts must begin has changed to 73 beginning Jan. 1, 2023, and increases to 75 on Jan. 1, 2033. Starting in 2024, Roth 401(k) accounts will no longer have an RMD.

Catch-up contributions (Sec. 109): Starting in 2025, retirement plan participants ages 60-63 may contribute an extra $10,000 or 150 percent of the regular catch-up limit annually, whichever is greater.

Matching contributions for student loan payments (Sec. 110): For plan years beginning Jan. 1, 2024, employers may "match" an employee's student loan payments with matching contributions to the employee's 401(k), 403(b), 457(b) or SIMPLE IRA plans. Employers may rely on an employee's annual self-certification as to the amount the employee has paid that year on the loan. The presumption is that employees pay off student loan debt in lieu of contributing to a retirement account, which this provision hopes to mitigate.

Mandatory automatic enrollment for new plans (Sec. 101): New 401(k) and 403(b) plans established after Dec. 31, 2024, must include automatic enrollments for all eligible participants at no less than 3 percent and no more than 10 percent of qualifying earnings, with automatic 1 percent increases annually up to a maximum limit set between 10 percent and 15 percent. Participants may opt out and may recoup contributions within 90 days of the start of automatic enrollment without penalty. Exempt from these requirements are existing plans, SIMPLE plans, employers with 10 or fewer employees and new employers in existence for less than three years.

Part-time worker eligibility (Sec. 125): Currently, part-time workers working less than 1,000 hours per year must be allowed to participate in a workplace retirement plan if they have three years of service and work at least 500 hours per year. As of 2025, that service time will be reduced to two years.

Penalty-free withdrawals: Employees may withdraw funds from their retirement accounts without having to pay the typical 10 percent tax penalty for certain early withdrawals.

Withdrawals without penalty include those:

• To terminally ill participants. Effective Dec. 29, 2022. (Sec. 326)
• To victims of domestic abuse (if repaid within three years). Effective Jan. 1, 2024. (Sec. 314)
• For personal or family emergencies, up to $1,000 per year.  Effective Jan. 1, 2024. (Sec. 115)
• For long-term-care insurance premiums, up to $2,500. This amount will be indexed annually for inflation. Effective Dec. 29, 2025. (Sec. 334)
• For individuals affected by a federally declared disaster, up to $22,000 for disaster recovery. Effective retroactively from Jan. 26, 2021. (Sec. 331)

Emergency savings account (Sec. 127): Effective Jan. 1, 2024, employers may allow non-highly compensated workers to set up an emergency savings account within a retirement plan. After-tax employee contributions of up to $2,500 can also be matched with employer contributions deposited into the retirement account, not the savings account. Employees may withdraw up to the full account balance at least once per month, with the first four withdrawals in a plan year done without penalty.

With many employees afraid to participate in retirement plans due to the inability to withdraw funds easily and quickly, the savings account eliminates that hurdle while allowing employer matching to fund the retirement plan.

Abandoned account mandatory distribution limit (Sec. 304): As of Jan. 1, 2024, employers may transfer the retirement account of a former employee into an IRA if the vested balance is $7,000 or less, up from $5,000 currently. This allows employers to remove more accounts from the plan, which may help some plans avoid annual plan audits required for plans with 100 or more accounts.

Top-heavy plan testing (Sec. 310): Effective Jan. 1, 2024, employers may test excludable and nonexcludable participants separately. The intent is to encourage smaller employers to offer retirement plans to workers under the age of 21, without the fear of making additional employer contributions required if testing fails.

De minimis financial incentives (Sec. 113): Effective Dec. 30, 2022, employers may offer small incentives, such as low-dollar gift cards, to entice employees to join the retirement plan. Incentives cannot be paid with plan assets.