| ...from the HR Perspective |
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| Human Resource Update | February 2013 |
Inflation Ignition
The President has proposed raising the Minimum Wage from $7.25 to $9.00 by 2015 and then indexing it to inflation. At this time there are 31 States which are governed by the Federal Minimum Wage law. There are 13 States with Minimum Wages of $7.25 and $8.00, five with Minimum Wages between $8.00 and $9.00 (CT, IL, MA, OR, and VT), and one State (WA) with a Minimum Wage over $9.00.
The proposal would lift the Minimum Wage for 49 States. And, it would lift the Minimum Wage for 31 States by $1.75 an hour or $3,640 per year, or a 24% increase for a person working a 40 hour week. Thereafter, the Minimum Wage would be increased by inflation.
If you employ anyone at the Minimum Wage, you are facing a severe problem. If you do not employ anyone at the old or even the proposed Minimum Wage, you will also be affected, but it will take a little longer.
Any increase in the Minimum Wage will be disruptive and cause economic problems by itself. When added to the additional tax burdens (corporate and personal) that are also being proposed, the hike in the income taxes, the additional taxes for Obamacare, the penalties under Obamacare, and policies that are increasing the prices of fuel and electricity, both large and small companies will be facing escalating challenges.
If we must "give" in regard to the Minimum Wage, I suggest that it be an increase of no more than 2% or about $0.15/hr. Doing any more then that will result in severe "Wage Compression" as the difference in pay between lower level positions is often 3-5%. Wage Compression occurs when the pay for lower paid positions is increased to just below, to equal or to surpass the pay for the next higher position. This causes morale, performance and turnover problems and I have experienced a case in which such compression brought about union organization by the folks who were in the previous higher positions.
E.g. an employee makes $7.25/hr. The Minimum Wage goes to $9.00 as proposed by the President. The next higher position is paid at $8.00 and would also have to be increased to at least $9.00, or to keep order and not have those employees complain or do less work, that position would have to be increased to $9.75. As you can see, this has a domino effect. Added to that is the additional cost for FICA, Medicare, UI, Dbl, and other mandated or voluntary expenses that are linked to pay. For labor intensive businesses (which most of the companies in the US now are) this increase could severely decrease or eliminate profits.
The only ways to counter that loss are to increase prices, decrease hours of work, terminate employees and have the others do their work (this may not always be possible), or to do nothing and let the business flounder and eventually go under. None of these are acceptable.
Raising prices may result in less business and the necessity of firing an employee or going out of business - at the very least it is inflationary as prices are increased without additional goods or services being produced in return. Firing an employee hurts the very people the President's proposal intends to help and places an additional unemployment and Medicaid burden on those continuing to work. Going out of business expands the unintended consequences of the President's proposal.
Now let's look at how linking increases in the Minimum Wage to the CPI will actually hurt our economy by creating a vicious circle that feeds on itself. If the CPI increases, the Minimum Wage increases. The increase in the Minimum Wage causes prices to go up which drives up the CPI. The increase in the CPI causes the Minimum Wage to go up.....and so on. The President and his supporters will argue that all this does is to keep the Minimum Wage in the same relative position. However, they will ignore the fact that Minimum Wage jobs will start to disappear as companies try to find ways to shrink the number of these positions, replace them with automation or send jobs overseas through business brokers or by opening facilities there. This will make it harder for the unskilled and under-educated to find jobs. The Administration ignores the fact that this proposal will accelerate the rate of inflation thereby hurting those who it intends to help - remember that the CPI is a lagging indicator (the President will argue that this relieves the legislature from a regular review of the Minimum Wage and will keep it in the same relative position). The Administration ignores the fact that if a business cannot find employees at the Minimum Wage the business will pay more. The business world will adapt so, in effect, the actual minimum wage (notice no initial caps) will increase over time.
Now is the time to inform your Congressperson of your position on this issue. You can reach them through these links:
Senate: http://www.senate.gov/general/contact_information/senators_cfm.cfm
House: https://writerep.house.gov/writerep/welcome.shtml
Our staff has had experience with increases in the Minimum Wage in different venues and would be pleased to assist you in restructuring your compensation and benefits packages to accommodate the proposed rules if they become law.
Sincerely,
Michael F. Yates,
President
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If you find value in this newsletter please let us know. Feel free to call me with a comment and/or ask a question at any time (908-689-4200) or send me an email (myates@mfyco.com). We offer this timely information as another benefit of your relationship with our company. If you feel a friend or colleague would benefit from receiving our newsletter, please feel free to forward a copy.
You can view all of our newsletters by clicking the 'newsletter archives' link at our company website www.mfyco.com. |
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National Right-to-Work Act
On February 4, 2013 the National Right-to-Work Act (Bill S.204) was placed on the Senate Legislative Calendar under General Orders, Calendar No. 11. The bill would preserve and protect the free choice of individual employees to form, join, or assist labor organizations, or to refrain from such activities.
The bill amends the National Labor Relations Act and the Railway Labor Act to repeal those provisions that permit employers, pursuant to a collective bargaining agreement that is a union security agreement, to require employees to join a union as a condition of employment (including provisions permitting railroad carriers to require, pursuant to such an agreement, payroll deduction of union dues or fees as a condition of employment.)
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Invitation to MFYCO Facebook
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Revised Delinquent Filer Voluntary Compliance Program
On January 29, 2013, the Department of Labor (Department) published a comprehensive update and restatement noticethat describes changes made to the Department's Delinquent Filers Voluntary Compliance (DFVC) Program, which was last updated in 2002. This update is effective immediately. and it supersedes and replaces the DFVC Program Notice published in the Federal Register on March 28, 2002.
SUMMARY
This Notice describes changes to the Department of Labor's (Department) Delinquent Filer Voluntary Compliance Program (DFVC Program or Program). Administrators of employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA) who fail to file annual reports on a timely basis can be subject to civil penalties under section 502(c)(2) of ERISA. The DFVC Program is intended to encourage delinquent plan administrators to comply with their annual reporting obligations under ERISA through the assessment of reduced civil penalties. The DFVC Program was initially adopted in 1995 and was last updated in a published Federal Register Notice on March 28, 2002 (2002 Notice). The Department's DFVC Program website has been updated periodically since 2002 to reflect the adoption of technical changes to the Program. Most recently, the DFVC Program website was updated to reflect the Department's final regulation mandating electronic filing of annual reports as part of the implementation of a wholly electronic ERISA Filing Acceptance System (EFAST2) for those reports. (See www.dol.gov/ebsa.) This Notice also describes an existing online penalty calculator and Internet-based payment system for the DFVC Program. (See http://www.dol.gov/ebsa/calculator/dfvcpmain.html).
Click here to go to the full Notice.
Click here to go to the DFVC Program Frequently Asked Questions (FAQ's)
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H-1B Visa
For those of you who are interested in employing a non-U.S. resident employee, the filing period for the Fiscal Year 2014 will begin on April 1, 2013. Last year the quota was filled within two months, so filing on time is crucial for approval of your petition.
For those of you unfamiliar with an H-1B Visa it is a United States nonimmigrant visa. It allows a U.S. company to employ, if a U.S. citizen or resident is not available, a foreign individual for three years up to a maximum of six years if extended. The holder of the H-1B Visa may apply for a Green Card if the company wants to sponsor his or her application. The filing period for the Fiscal Year 2014 will begin on April 1, 2013.
The H-1B Visa enables professionals in "Specialty Occupations" which means accounting, computer analysts, programmers, database administrators, web designers, engineers, financial analysts, doctors, nurses, scientists, architects and lawyers, to make a valuable contribution to the American economy.
The petitions are submitted by employers based on their need for the non-U.S. resident employee. H-1B Visa holders must possess a minimum of a bachelor's degree. However, requisite experience can substitute for education, depending on the individual case.
In order for the H-1B visa to be issued, both the employer and employee must satisfy the specific requirements listed below.
Employer Requirements:
- The job offer must be one of the Specialty Occupations
- There are criteria for wages offered and the actual job performed
- No U.S. citizen or resident must be available for the job
- The petition must be submitted by the company (not the employee)
- The Company is responsible to offer the employee vacation, sick leave, maternity leave, paternity leave and the spouse may enter on the H-4B visa.
Employee Requirements:
- A Bachelor degree
- Specialized skill
- Speak and read English
H-1B Visa restrictions and limits:
- Only 65,000 new visas are issued every year. H-1B Visas issued for the benefit of non-profit organizations and higher education institutions do not count towards the annual limit.
- H-1B visas are issued for a maximum of six years.
H-1B Submission Packet
If you are interested in applying for an H-1B Visa to acquire a non-U.S. resident employee, the Submission Packet should contain the following Forms and paperwork in the following order:
- Form I-907 (if filing for Premium Processing Service)
- Form G-28 (if represented by an attorney or accredited representative)
- Form I-129, Petition for a Nonimmigrant Worker
- Addendums/Attachments
- H Classification Supplement to Form I-129 and/or Free Trade Supplement (for H-1B1 Chile-Singapore petitions)
- H-1B Data Collection and Filing Fee Exemption Supplement
- All supporting documentation to establish eligibility
- Provide a Table of Contents for supporting documentation
- Tab items as listed in Table of Contents
- Arrival-Departure Record (Form I-94) if the beneficiary is in the U.S.
- Student & Exchange Visitor Information System (SEVIS) Form I-20 if the beneficiary is a current or former F-1 student or F-2 dependent
- SEVIS Form DS-2019 if the beneficiary is a current or former J-1 or J-2
- Form I-566 if the beneficiary is a current A or G nonimmigrant
- DOL certified Labor Condition Application (LCA), Form ETA 9035
- Employer/attorney/representative letter(s); and
- Other supporting documentation.
Duplicate copy of the petition, if necessary. Clearly identify the duplicate copy of the petition as "COPY", so that it is not mistaken for a duplicate filing.
For more information on the H-1B Visa visit the U.S. Citizenship and Immigration Services website at http://www.uscis.gov.
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Call: 908-689-4200 to contact a
MFYCO professional consulting associate.
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Reminder!
Affordable Care Act's Employer Notice Requirement Delayed
The Employer Notice Requirement for the Affordable Care Act that was to go into effect March 1, 2013 was delayed. (See our January issue for details.) |
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Amendments to Department of Labor's Abandoned Plan Program
On December 12, 2012, the Employee Benefits Security Administration of the Department of Labor (DOL/EBSA) published in the Federal Register a proposed rule and related class exemption that will make it easier for Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies' retirement plans. The proposal would allow such trustees to use EBSA's existing Abandoned Plan Program to terminate, wind up and distribute benefits from such plans.
The existing Abandoned Plan Program provides streamlined termination and distribution procedures for abandoned individual account plans, including 401(k) plans, under which benefits may be distributed in a manner that can substantially reduce fees charged to participants' accounts for, among other things, annual reporting, legal compliance and other administrative services, including termination costs. By making this streamlined process available to Chapter 7 bankruptcy trustees, the time and resources required to "wind up" a bankrupt company's retirement plan can be significantly reduced.
Under amendments in 2005 to federal bankruptcy law, if a company in liquidation administered an individual account plan, the company's Chapter 7 bankruptcy trustee must perform those functions. The Abandoned Plan Program, established in 2006, provides specific guidance on when a plan may be considered abandoned, who may make that determination, and exactly how to terminate the affairs of the plan and make benefit distributions. The program also limits potential fiduciary liability of financial institutions that step in to terminate and wind up plans that have been abandoned by their sponsors.
Click here to go to the proposed rule.
Click here to go to the related class exemption. |
What would you like to see in a future issue?
Contact our office with your suggestions.
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You Can Help
Food banks and pantries here in New Jersey as well as across the country continue to struggle to keep up with increasing demand. As the economy continues its slow struggle toward recovery, food banks and pantries are working extra hard to address a harsh sign of the times. The recession has made the hunger problem much worse, particularly among older people 50-59 who are usually too young for Social Security and Medicare and too old for programs that help families with children. In 2011, 14.9 percent of households (17.9 million households) were food insecure, the highest number ever recorded in the United States. There are easy ways we can all help:
1) Instead of asking for a birthday gift, ask your friends and family to make a donation to a local food bank.
2) Add one item to your grocery list each week. After a few months of saving items, drop them off at your local pantry. Many food banks have drop off boxes located in the grocery store. Consider dropping your item in there every week.
3) Donate your time. Many food banks need people to help sort and distribute food.
4) Collect coupons. Many times you can get free items when they are on sale and you have a coupon. If it is an item you personally don't need, donate it.
5) Prefer to donate your time to an animal shelter? The dogs and cats can always use the company. Stop in to pet them and give them the attention they deserve. Shelters can always use help cleaning too and of course many are in need of pet food and cleaning supplies.
What items do pantries need most? (It is always best to check directly with your food bank.)
· Canned fruits and vegetables
· Peanut butter
· Pasta and sauce (glass jars are discouraged)
· Baby food
· Soup
· Personal care products (diapers, sanitary, toilet paper, toothpaste, etc.)
· Coffee, tea, hot cocoa
· Canned meat (tuna, ham etc.)
· Cereal
If you prefer to make a cash donation, there are many organizations online that can help. Here are just a few:
· YouGiveGoods.com - they offer online food drives. Search by your town and locate a drive. Select the item you wish to donate and when the drive is over, they deliver the items for you. You can even start your own drive if you know of a pantry in need!
· Drive to End Hunger - endseniorhunger.aarp.org. An AARP foundation with Jeff Gordon as there spokesperson. They support people over the age of 50 who are hungry. You can donate on line or text "HUNGER" to 50555.
· Feed the Children.org - Feed the Children addresses four basic needs: food and nutrition, water and sanitation, education and health, and livelihood community development.
MFYCO does not indorse any of these companies. Always check how your money will be spent when making monetary donations. There are thousands of organizations both local and on the global scale that need help. Finding your favorite one can be challenging but worth it! Head over to our facebook page to share any tips you have on how to help or let us know where your favorite organization is. We can all make a difference, one box of pasta at a time!
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Form W-2 Errors Showing Excess Deferrals
(Taken from IRS Employee Plans News Issue Number 2013-1)
The IRS' 401(k) Excess Deferral Project found errors in elective deferrals reported on Form W-2, Box 12. In its 401(k) Excess Deferral Project, the Employee Plans Compliance Unit found errors in elective deferrals reported in Box 12 of Form W-2, Wage and Tax Statement. The project sampled employers who filed Forms W-2 that showed some employees had elective deferrals in excess of the annual limit.
Project results - Responses showed that 75% of the employers in the sample needed to correct their Forms W-2.
Form W-2, Box 12 - Employers must report 401(k) elective deferrals in Box 12 of the Form W-2, using the code "D."
Employer errors - Employers incorrectly reported as 401(k) elective deferrals in Box 12:
- elective deferrals made to 403(b) or 457 plans, or
- other non-qualified amounts.
Employers also made errors in reporting Social Security wages and deferred compensation, and used incorrect codes. Form W-2 filers can avoid some of these errors by following the Form W-2 instructions. To correct their previously filed Forms W-2, employers filed over 26,000 Forms W-2C, Corrected Wage and Tax Statement. Because of our compliance contact, most of these employers became aware of software and data transmission problems when moving files back and forth with their third party administrator or payroll vendor and took action to fix those problems for future W-2 filings.
Fixing excess deferral errors - When an employee's elective deferrals exceed the annual limit during a calendar year, the employee must include the excess amount in income for the year in which it was contributed to the plan. The employee is also taxed on the earnings on the excess elective deferrals in the year the plan distributes them. If the plan doesn't distribute the excess deferral by April 15 of following year, the excess is taxable in both the year deferred and the year distributed.
Some employers in the sample had already recognized employees who had made excess elective deferrals to their plan. They corrected this by returning the excess deferrals and issuing a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. This form is generally filed for each person to whom a distribution of $10 or more is made.
Additional resources
- Get help on how to fix excess deferrals and prevent future mistakes in the IRS 401(k) Plan Fix-It Guide.
- Learn about correcting other plan errors using the Employee Plans Compliance Resolution System.
- Read about other Form W-2 errors found in this project.
Contacting EPCU - If you have questions about how this project relates to your retirement plan, email us at EPCU@IRS.GOV and include "401(k) Excess Deferrals" in the subject line.
Page Last Reviewed or Updated by the IRS: 13-Feb-2013 |
Retirement Plan Limits
All limits are based on the calendar year.
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2013 |
2012 |
2011 | |
Maximum Annual Defined Benefit |
$205,000 |
$200,000 |
$195,000 | |
Maximum DC Annual Addition ($$) |
$51,000 |
$50,000 |
$49,000 | |
Maximum 401(k) Deferrals |
$17,500 |
$17,000 |
$16,500 | |
Older EE Catch-Up Contribution |
$5,500 |
$5,500 |
$5,500 | |
Maximum Plan Compensation |
$255,000 |
$250,000 |
$245,000 | |
Highly Compensated Threshold |
$115,000 |
$115,000 |
$110,000 | |
Key Employee in a Top-Heavy Plan |
$165,000 |
$165,000 |
$160,000 | |
SSA Social Security Wage Base |
$113,700 |
$110,100 |
$106,800 | |
PBGC Maximum Monthly Guarantee* |
$4,789.77 |
$4,653.41 |
$4,500 | |
PBGC Maximum Annual Guarantee* |
$57,477.24 |
$55,840.92 |
$54,000 | |
Maximum DC Annual Addition (%) |
100% |
100% |
100% | |
Social Security Tax - Employee
Social Security Tax - Employer |
6.2%
6.2% |
4.2%
6.2% |
4.2%
6.2% | |
Medicare Tax |
1.45% |
1.45% |
1.45% | |
DC Plan Deduction Limit |
25% |
25% |
25% | |
Definition of Compensation for DC
Plan Deduction Limit |
Includes Deferrals |
*Life Annuity at age 65
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about MFYCO ...
- Michael F. Yates & Company, Inc. can help you with a variety of services ranging from retirement plans to providing results-oriented survey instruments, training and development programs for your employees. Our products and services are intended to help you maximize the effectiveness of your Human Resources function.
- These products and services incorporate our years of experience so that you receive rapid results and exceptional value. From onsite consulting, to strategic business integration, to Web enablement, we understand how Human Resources can be applied to solve your problems and achieve your goals. As a result, we can help you get the most out of your investment and turn your most precious resource into a competitive advantage.
- We offer Consulting, Retirement Planning, Pension and 401(K) both qualified and non qualified Plans, Welfare Plans, Communications, Computer Systems, Executive Plans, Compensation, Mergers, Acquisitions, Divestitures and Other Services.
We offer a true and honest, Client Partnership.
Take the Michael F. Yates & Company, Inc. challenge! Call us today ... 908-689-4200
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How to Track Government Recovery Spending
"The Board shall establish and maintain...a user-friendly, public-facing website to foster greater accountability and transparency in the use of covered funds. The website...shall be a portal or gateway to key information relating to the Act and provide connections to other government websites with related information."
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Michael F. Yates & Company, Inc.
_________________
101 Belvidere Avenue
P.O.Box 7
Washington, NJ 07882-0007
908-689-4200
fax: 908-689-6300
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Our staff and firm are proud members
of the following professional organizations:
Society of Actuaries
American Society of Pension Professionals & Actuaries
Society for Human Resource Management
GAPS (Global Association Pension Services)
WorldatWork
American Management Association
National Federation of Independent Business
Better Business Bureau
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YOUR USE OF THIS WEBSITE CONSTITUTES YOUR AGREEMENT TO BE BOUND BY THESE TERMS AND CONDITIONS. IF YOU DO NOT AGREE TO THESE TERMS, YOU SHOULD IMMEDIATELY DISCONTINUE YOUR USE OF THIS SITE.
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MFYCO PRIVACY POLICY
Michael F. Yates & Company, Inc.
believes strongly in protecting the privacy of its users.
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