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Month-End Benefits Reminder

Reminder of ISO/ESPP Reporting Obligations. . . .

No later than January 31st, every corporation that issued stock pursuant to the exercise of an incentive stock option (an “ISO”) during the prior year must provide the optionee a statement containing certain information. The statement, which is due February 2nd this year, is required even if the optionee disposed of the stock in a “disqualifying disposition.” However, if there was a disqualifying disposition, there are additional reporting obligations. The tax law also requires corporations to provide certain information to an individual who transfers shares acquired pursuant to an employee stock purchase plan. A failure to satisfy either of these requirements, absent reasonable cause, can result in a $50 penalty with respect to each failure. (Penalties are capped at $100,000 per calendar year.)

In 2006, the Internal Revenue Code was amended to provide that this information must also be filed with the Internal Revenue Service, and the IRS has published proposed regulations providing for additional individual-level disclosure. But the IRS filings and the additional individual-level disclosure are not required for 2008 exercises and transfers.

If you would like samples of the existing statements, please let us know.

. . . . Limited 409A Reporting . . .

Employers will eventually be required to report certain amounts deferred under a nonqualified deferred compensation plan subject to Internal Revenue Code Section 409A in box 12 of Form W-2 using code Y (or in box 15a of Form 1099-MISC for nonemployees), but the IRS has postponed these reporting requirements until further notice. However, the requirement to report nonqualified deferred compensation currently includable in income as a result of a violation of Internal Revenue Code Section 409A in box 1 and in box 12 of Form W-2 using code Z (and in box 7 and box 15b of Form 1099-MISC for nonemployees) has not been postponed.

. . . . And a Reminder of Massachusetts Health Care Reform Reporting Requirements

Under Massachusetts health care reform, on or before January 31^st of each year employers must issue a written statement on Form MA 1099-HC to each Massachusetts resident who participates in an employer-sponsored health plan, whether through an insured or self-insured arrangement. (It does not appear that this deadline is postponed even though January 31, 2009 is a Saturday.) A filing with the Commonwealth is also required. Employers may contract with a service provider or insurance carrier to issue the Form MA 1099-HC, a copy of which is available on the Department of Revenue’s Web site. Failure to issue the statement may result in a penalty of $50 for each failure. (Penalties are capped at $50,000 per employer per calendar year.)

In addition, the Division of Unemployment Assistance recently issued a notice changing the Fair Share Contribution filing requirements (yet again). In the Fall of 2008, the Division indicated that beginning with the last quarter of 2008, the filing would be required on a quarterly basis. (Please see our Massachusetts Health Care Reform: Reminders & Updates advisory dated November 4, 2008.) Responding to industry concerns that a quarterly filing was unnecessarily cumbersome, the Division revised its reporting requirement. All covered employers will be required to submit a quarterly filing by February 15, 2009 covering the October 1, 2008 through December 31, 2008 quarter. (Because February 15, 2009 is a Sunday, the filing should be due on February 16, but nothing from the State has yet confirmed this conclusion and so filing by February 15 may be the safer course of action.) Subsequent quarterly filings for the remaining three quarters of the fiscal year, however, will not be required unless the employer fails to pass the fair share contribution requirement in the first quarter or is “at risk of becoming liable for payment in future quarters.” (The notice does not clarify how to determine whether or not an employer is at risk.)

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If you have any questions about any of these topics, please contact one of us.