Here is the list of new caps and limits for 2024:

Wage Caps for Payroll Taxes

Wage caps refer to the maximum amount of an individual's income that is subject to a particular tax or benefit calculation.

• Social Security Increases from $160,200 to $168,600
• Medicare (no change) – $200,000
  • Anything over $200,000, employees pay an additional 0.9%
• FUTA (no change) – $7,000.00

Retirement Plan Contribution Limits

Retirement plan contribution limits refer to the maximum amount of money an individual can contribute to a retirement savings account within a given tax year. They are designed to ensure that individuals do not disproportionately benefit from tax advantages for retirement savings. If contributions exceed these limits, there may be tax penalties or consequences.

• 401K, 403b, 457 plans – $23,000
• 401K, 403b, 457 catch-up plans – $7,500 (no change)
• Simple IRA/401K plans – $16,000
• Simple IRA/401K catch-up plans – $3,500 (no change)
• IRA after-tax – $7,000
• IRA after-tax catch-up – $1,000 (no change)
• Qualified Plans Compensation Limit – $345,000
• Defined Contribution Maximum Annual Addition – $69,000

Flexible Spending Account (FSA) Contributions Limits

FSAs are tax-advantaged financial accounts that allow employees to set aside a portion of their pre-tax earnings to cover eligible medical expenses. FSA contribution limits refer to the maximum amount an individual can elect to contribute to their FSA during a specific plan year.

• Health Care FSA – $3,200
• Dependent Care Account  – $5,000.00 (no change)
• Parking/Transit Account – $315/month

Health Spending Account (HSA) Contributions Limits

HSAs are tax-advantaged financial accounts available to individuals enrolled in a high-deductible health plan (HDHP). It allows them to set aside money on a pre-tax basis to pay for qualified medical expenses. HSA contribution limits refer to the maximum amount an individual or family can contribute to their HSA in a tax year.

• Single Coverage – $4,150
• Family Coverage – $8,300

Starting January 1, 2024, the minimum wage in Hawaii will rise from $12 to $14 per hour. For employers utilizing Hawaii's Tip Credit Law, the 2024 increase to minimum wage increases the adjusted minimum wage for tipped employees to $12.75 per hour. ProService will update our payroll systems on January 1 so that the wage rate for hourly employees below the new minimum wage of $14/hour will be automatically adjusted to receive the new minimum wage. We will adjust our payroll system for you if you use tip credits. Employers should notify their affected employees in advance in writing or through a posted notice of their new pay rate. Read our article to learn more: What to Know About Hawaii’s Minimum Wage Increase on Jan 1.

Resources for employers:

• Minimum Wage Notice [Word Template]
• Minimum Wage & Tip Credit [Poster]

Starting January 1, 2024, Hawaii's new pay transparency law goes into effect. This law applies to employers with 50 or more employees and mandates that hourly/salary ranges be included in all job listings. Hawaii's pay transparency law follows similar laws recently enacted in California, Colorado, and New York, intending to reduce pay inequality in the workplace. Not only does it benefit job applicants, it also benefits current employees by giving them visibility into wage ranges of open positions, enabling them to seek higher compensation, thereby helping to further reduce pay inequalities. Read our article to learn more: Hawaii Adopts Pay Transparency Laws.

2023 W-2 forms will be mailed directly to employees and postmarked no later than Wednesday, January 31, 2024. Electronic copies will also be available to employees on their HR platform. Please remind your employees to ensure we have their current name, mailing address, and SSN on file by Friday, December 15. If they need assistance updating their information in their HR platform, employees can call the ProService Employee Service Center at 808-394-4162 from Monday – Friday, 8 am – 5 pm, for assistance.

Form 1095-C, a summary of health insurance offered to employees, will be mailed along with your employees’ W-2 to their mailing address on file. It will be postmarked no later than Wednesday, January 31, 2024. Note: Only employers defined as “Applicable Large Employers” by the IRS (usually organizations that employ 50 or more employees) must provide this report to employees.

Minimum Wage

If you have out-of-state employees, please note that minimum wage will be going up for most states in 2024. You can learn more about out-of-state minimum wage increases here.

Temporary Disability Insurance

Here are new employer and employee contributions for 2024. View the TDI chart here.

Family & Medical Paid Leave Insurance

Every year, more states add Family & Medical Paid Leave Insurance benefits. As of 2024, 12 states and Washington D.C. have (or will have) state-required paid leave for an employee's medical condition and/or paid family leave for bonding with a new child, caring for a seriously ill or injured family member, and certain other purposes. This includes California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Virginia, Washington, and Washington D.C.  Despite some common elements, what is covered, who is eligible, and who contributes to the fund varies by state. Employee payroll deductions usually fund this benefit (except in Washington D.C. where employers fully fund it). In other states, Family & Medical Paid Leave Insurance is partially funded through employer payroll deductions based on employee headcount.

Notable updates: 

• Colorado – Starting January 1, 2024, the types of earnings on which premiums and benefits calculations will be based now include: Salary, Hourly wage, Overtime, Tips, Bonuses, Commissions, Piece rate, Employer-provided paid leave (PTO, sick, vacation, etc.), Disability benefits paid by the employer and not by a third-party, Parental leave paid by the employer and not by a third party, and the value of lodging or meals used as a credit toward the minimum wage. PFML resources for Colorado: Employer Page | Employer Tool Kit | FAQs
• Massachusetts –Effective January 1, 2024, Massachusetts is implementing changes to its premium rate, increasing it from 0.63% to 0.88% for the year 2024, up to the Social Security cap for 2024. The contribution is divided into a medical leave contribution, which is 0.7% for 2024, and a family leave contribution, which is 0.18% for 2024. All of the family leave contributions can be withheld from employees’ pay, while up to 40% of the medical leave contribution, or 0.28%, can be withheld. Employers must pay at least the other 60%, or 0.42%, of the medical leave contribution. Employers with fewer than 25 employees do not have to pay the required employer share of the medical leave contribution, so their contribution rate is 0.46% for 2024, up from 0.318% in 2023.
• Washington – Beginning January 1, 2024, Washington is introducing changes to its premium rate, decreasing it from 0.8% to 0.74% for the year 2024, up to the Social Security cap for 2024. For employers with at least 50 employees, the new arrangement mandates that they contribute 28.57% of the premium rate, with employees responsible for the remaining 71.43%, as outlined in the release. This marks a shift from the 2022 scenario where covered employers paid 27.24% of the premium, and employees covered the remaining 72.76%. In contrast, employers with fewer than 50 employees are relieved from the obligation of paying the employer portion of the premium. However, they are still required to withhold and remit the employee portion, as detailed in the release.
• Maryland – As of October 1, 2024, Maryland has been added to the list of states implementing a new PFML tax. This entails employers being obligated to pay taxes and withhold them from employee wages. Beginning on October 1, 2024, both employers and employees are required to contribute to a family-leave insurance fund based on wages up to the Federal Social Security cap for 2024, with a fixed rate of 0.9% during the period from October 1, 2024, to June 30, 2026. Note: It's important to note that employers with fewer than 14 employees are exempt from contributing to the program. However, they are still mandated to withhold and remit the employee portion of the contribution. Further details will be provided in the coming months as the state finalizes the regulations for the program.
• Delaware –  Starting January 1, 2025,Delaware has been newly included in the list of states implementing a PFML tax requirement. This mandates employers to both pay taxes and withhold taxes from employee wages beginning in 2025. Employers that have fewer than 9 employees working in Delaware are exempt. Employers and employees pay a family-leave insurance contribution on wages up to the federal Social Security cap for 2025. Effective for 2025 and 2026, the medical leave tax rate is 0.8%. Employers can require employees to pay 50% of the contribution.

FUTA Reduction Credit

FUTA stands for the Federal Unemployment Tax Act, a federal law that imposes a tax on employers to fund unemployment benefits. The standard FUTA tax rate is 6.0% on the first $7,000 of each employee's wages. However, if a state has no outstanding federal loans for unemployment benefits, the FUTA tax rate is effectively 0.6% due to the FUTA tax credit (6.0% – 5.4% credit). Currently, two states have not fully paid back their federal loan and will lose the full FUTA tax credit: California and New York. If you have employees in California or New York, you will be charged an additional 0.6% on employees’ wages, which comes to approximately $42.00/employee. Note: As a ProService client, you don't have to make any changes. We will reconcile the employees in each of those states. Billing for the extra $42.00/employee will appear on your invoice in mid-December. The extra amount will be reported and paid on your normal FUTA 940 return by January 31, 2024.

New State Tax Legislations

• Alabama Overtime Exemption – The state has passed a new bill, HB 217, which exempts certain overtime pay from state income tax from Jan. 1, 2024, to June 30, 2025. The exemption applies to overtime paid rather than earned. If an employee works overtime before June 30, 2025, but is not paid until after that date, the overtime pay is not exempt because it was not received within the exemption period. The exemption applies only to employees paid on an hourly basis. 
• Vermont Child Care Tax – The state has passed a new bill, HB 217, creating a new payroll tax to fund its Child Care Financial Assistance Program effective July 1, 2024. The tax will provide funding for the Child Care Financial Assistance Program, subsidizing childcare costs for certain families. The payroll tax is 0.44% of an employee’s covered wages and may deduct 0.11% from employees’ wages. Employers must remit the tax to the state tax department using the same requirements as Vermont’s income tax, including the time and manner of payment. Wages subject to federal income tax withholding are subject to the tax. More to come when we approach the effective date.