| ...from the HR Perspective |
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| Human Resource Update | July 2013 |
Happy 4th of July!
All of us wish you a happy 4th of July and the opportunity to celebrate with family and friends over a long weekend!
Late yesterday the Treasury Department announced that it would delay the implementation of the "employer mandate" penalties for large employers who do not provide health-insurance coverage from 2014 to 2015. While this action provides relief from some of the provisions of a law that has yet to be deciphered, it also presents those employees who have no employer sponsored coverage with confusion.
Treasury attributed the delay to the deficiencies of the reporting system that accompanied the requirement that large companies (ones with 50 or more full-time employees) provide employees with the required level of healthcare coverage. If a company did not, it would pay at least a $2,000 fine for each full-time employee over 30 employees. While larger companies objected to the provision, smaller companies argued that it imposed a severe penalty that would prevent them from expanding beyond 50 employees. Some economists proffered that the implementation of the law and related penalties were coming at the wrong time - just when the economy was starting to see some light.
This is the Administration's second delay of an Obamacare provision. The first occurred earlier this year and moved the effective date of the provision that will enable workers at small businesses to choose their own health insurance plans rather than have their employers select for them from 2014 to 2015. The Administration said there were operational challenges that precipitated the move.
Both of these delays demonstrate how complex the law is. Some who supported the law now realize how many of its provisions may actually hurt employees and companies, increase healthcare costs, and ration the remaining resources after healthcare provider cutbacks are made due to provider financial viability.
Some pundits are suggesting that the delay is to postpone the impending chaos of the effects of the penalties until after the 2014 mid-term elections. That chaos has already started with some large companies (for example: supermarkets, fast food establishments, restaurants, and landscapers) cutting hours to avoid or mitigate the penalty. What the pundits seem to have ignored is that the Administration has not delayed the tax on those who are not covered by an employer plan. The employer mandate delay will most likely subject many non-covered employees to the "individual mandate" to secure coverage through the "exchanges" or pay a "tax" (the Supreme Court's redefinition of the individual penalty.)
Congresswoman Pelosi was right, paralleling her infamous statement: we have to read the bill to understand it. It is a shame Congress did not do so before it was passed.
If you are wondering how Obamacre will impact your operations, we would be pleased to discuss how your concerns can be addressed.
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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Supreme Court Overturns Section 3 of DOMA
So, you thought you would have a peaceful Summer! Well, things do not always go as planned! The Supreme Court's repeal of Section 3 of DOMA (the Defense of Marriage Act) has opened a wide array of new rights and benefits to same-sex married couples. The Court's decision was effective immediately.
Thirteen States (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington,) plus the District of Columbia now officially permit same-sex couples to marry. Depending on the situation, it may be simple or somewhat complex to accommodate this change. Let's look at how this new change in the law could affect our businesses.
The broad HR related areas to examine are:
· Payroll and related tax schedules, including how welfare benefits are taxed,
· qualified retirement plans,
· healthcare, dental, vision and other welfare plans,
· supplemental life insurance programs,
· FMLA,
· HR policies,
· Employee communications, and
· Administration
Companies operating in a State or multiple States that that recognize same-sex marriages, will be able to adjust everything to reflect the Court's decision. Companies that operate in a State or States that do not recognize such marriages, as of this moment, do not have to do anything. Companies that operate in both States that recognize and do not recognize same-sex marriages will have a more difficult job of complying with both environments set by the decision. Even if those companies wanted to treat everyone the same as the employees in a State that recognized same-sex marriages, they could not as the State's recognition changes the manner in which some Federal law is applied, most specifically income taxes. As of this moment, one cloudy situation is how to treat an employee in a same-sex marriage who moves from the State in which the marriage was officiated to a State which does not recognize same-sex marriages. At first glance, applying Section 2 of DOMA seems to indicate that the marriage would not be recognized in the new State. However, some, including President Obama, feel that once a person is married in a State that recognizes same-sex marriages, that person should continue to have the advantages enjoyed in that State no matter where the person moves. We are sure that and other unanswered questions will be hammered out in the next few months.
We will provide updates as the dust settles on this new ground. If you have any questions about how the decision affects your plans and policies, please call so we may discuss them with you.
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The Seven Most Common Wage and Hour Compliance Mistakes:
- Misclassifying employees as exempt;
- Violating the "salary basis" rule;
- Failing to pay for compensable off-the-clock time;
- Awarding nonexempt employees compensatory time rather than overtime payments;
- Miscounting travel time;
- Miscounting training time; and
- Miscalculating the regular rate of pay.
If you have questions about how you are classifying your employees, what the "salary basis" rule is and are you violating it, or how you are calculating pay, give us a call. We can help. |
Invitation to MFYCO Facebook
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Self-Correction of Retirement Plan Errors
Part 2 of 3 Part Series
You can self-correct many retirement plan errors without contacting the IRS or paying a fee. There are no application or reporting requirements.
Self-correction, also known as the Self-Correction Program or "SCP," is authorized under Revenue Procedure 2013-12, the revenue procedure that governs the Employee Plans Compliance Resolution Program (EPCRS).
You can self-correct an insignificant operational error at any time to preserve the tax-favored status of your plan. An operational error occurs when you don't follow the written terms of the plan. Even where the operational error is significant, you may still be able to self-correct if action is taken in a timely manner.
Steps to Self-Correct Retirement Plan Errors
There is no fee for self-correction of retirement plan errors. Nothing needs to be filed with the IRS. However, the plan sponsor should maintain adequate records to demonstrate correction in the event of a plan audit.
- Make sure that you're eligible to self-correct. Is the failure eligible for self-correction, and did your plan have appropriate practices and procedures?
- Make any necessary corrections to put the participants in the position they would have been in if the error had not occurred.
- Document the steps you took to correct the error.
- Adjust your administrative procedures, if necessary, to make sure the mistake does not happen again.
Correction methods
Use a reasonable and appropriate self-correction method. Follow the general correction principles described in the IRS correction program revenue procedure's Section 6. If you use one of the correction methods described in the examples in Appendix A or B of the revenue procedure, the IRS will automatically treat it as reasonable and appropriate.
Changes to administrative procedures
If needed, the plan sponsor should make changes to its administrative procedures to ensure that the mistakes don't happen again.
Prompt correction is best
Despite all of your good efforts, mistakes can happen. Conducting periodic reviews of the plan's operation and promptly fixing operational failures after they are discovered can reduce the cost of correction.
Timing of Retirement Plan Self-Correction
An insignificant operational failure can be self-corrected at any time.
A significant operational failure eligible for self-correction must generally be completed:
- before the end of the second plan year after the failure occurred, or
- substantially corrected within a reasonable time.
Substantially corrected within a reasonable time
A failure is deemed substantially corrected within a reasonable time if one of these two tests is met:
- The plan sponsor takes prompt action within the correction period (the two plan years after the year in which the failure occurred) to:
- identify the operational failure,
- formulate a correction method, and begin to make the corrections.
Correction must be completed within 120 days after the last day of the correction period.
or
- The plan sponsor:
o completes correction for at least 65 percent of participants affected by the mistake within the correction period (the two plan years after the year in which the failure occurred), and
o completed correction for the remaining affected participants in a diligent manner.
Self-correction isn't available for significant operational failures that are not timely corrected. However, the sponsor can still correct these failures with IRS approval by using the Voluntary Correction Program.
Special Rules
ADP and ACP test corrections
The two-year period for self-correcting ADP or ACP test violations starts after the close of the 12-month correction period that is provided by the 401(k) and (m) regulations.
Example: The ADP test is failed for the plan year ending December 31, year 1. The regulatory correction period ends December 31, year 2. The self-correction period would extend for two plan years beyond the end of the regulatory correction period, ending on December 31, year 4.
Correction via plan amendment
A plan sponsor may self-correct an operational failure by a plan amendment to conform the terms of the plan to the plan's prior operations to correct:
- hardship distributions without authorizing plan language,
- loans made without authorizing plan language, or
- early inclusion of otherwise eligible employee.
In limited circumstances, a plan sponsor can amend the plan to authorize additional participant allocations made to correct prior nonelective contributions that were made without regard to the compensation limits of IRC Section 401(a)(17).
The plan sponsor must submit a determination letter application before the end of the plan's applicable remedial amendment period. Identify the corrective amendment in the cover letter.
Plan errors related to plan mergers and acquisitions
A significant failure related to:
- transferred assets from another plan, or
- assumption of a plan
in connection with a corporate merger, acquisition, or similar business transaction, can be self-corrected until the last day of the plan year that begins after the business transaction, even if the failure occurred more than two plan years earlier.
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Determining Full-time Status under the
Patient Protection and Affordable Care Act (PPACA).
There has been much discussion in certain circles about who a large employer is and how they need to determine who is full-time when determining who is eligible for affordable minimum essential health insurance coverage and what the penalties (assessable payment under §4980H) would be for not supplying coverage under the Patient Protection and Affordable Care Act (PPACA).
Part One will address the different ways of counting an employee's hours for determining their status as ongoing employees. Part Two will address the different ways of counting an employee's hours for determining their status as new, transition, variable hour and seasonal employees and Part Three of this three part article will cover the shared responsibility for employers regarding health coverage and the assessable payments.
Part One
Ongoing Employees: Safe Harbor Option
For ongoing employees, employers generally will be permitted to use the safe harbor method based upon measurements and stability periods described in Notices 2011-36 and 2012-17. The measurement period the employer chooses to apply to ongoing employees is referred to as the "standard measurement period".
An ongoing employee is an employee who has been employed by the employer for at least one complete standard measurement period. Different rules may apply to employees who move into full-time status during the year. Additional rules regarding the treatment of employees who experience a change in employment status are expected to be included in upcoming regulations.
Under the safe harbor method for ongoing employees, an employer determines each ongoing employee's fulltime status by looking back at the standard measurement period (a defined time period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer). The employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided the determination is made on a uniform and consistent basis for employees in the same category. If the employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employer treats the employee as a full-time employee during a subsequent "stability period", regardless of the employee's number of hours of service during the stability period, so long as the employee remained employed.
When an employer determines an employee is full-time during the standard measurement period, the stability period would be a period of at least six consecutive calendar months that is no shorter in duration than the standard measurement period and that begins after the standard measurement period. If the employee is determined not to be full-time during the standard measurement period, the employer would be permitted to treat the employee as not full-time during the stability period that follows, but is not longer than the standard measurement period.
Employers may use measurement periods and stability periods that differ either in length or in their starting and ending dates for the following categories of employees: (1) collectively bargained employees and non-collectively bargained employees; (2) salaried employees and hourly employees; (3) employees of different entities; and (4) employees located I different States.
Ongoing Employees: Administrative Period Safe Harbor Option
Because employers may need time to: determine ongoing employees eligibility for coverage or to notify and enroll employees an employer may make time for these administrative steps by having its standard measurement period end before the associated stability period begins. However, any administrative period between the standard measurement period and the stability period may neither reduce nor lengthen the measurement period or the stability period. The administrative period following the standard measurement period may last up to 90 days. To prevent this administrative period from creating any potential gap in coverage, it will overlap with the prior stability period, so that during any such administrative period applicable to ongoing employees following a standard measurement period, ongoing employees who are eligible for coverage because of their status as full-time employees on a prior measurement period would continue to be offered coverage.
New Employees: Reasonably Expected to Work Full-Time
If the employee is reasonably expected to work full-time at his/her start date, an employer that sponsors a group health plan that offers coverage to their employees at or before the conclusion of the employee's initial three calendar months of employment will not be subject to the employer responsibility payment under §4980H by reason of its failure to offer coverage to the employee for up to the initial three calendar months of employment. |
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Call: 908-689-4200 to contact a
MFYCO professional consulting associate.
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I-9 Mistakes to Avoid
To be assured your I-9 Form process will withstand an audit avoid making these common mistakes:
1. Completing the form after the required deadlines. A new hire must complete Section 1 on or before the first day. Section 2 must be completed by the employer within three days of the start date.
2. Using the wrong version of the form. The most current released version of the I-9 Form is dated March 8, 2013.
3. Lack of employee's signature on form. An unsigned I-9 Form is null and void.
4. Requesting specific documentation. It is the employees right to decide which documents they want to present from the list of acceptable I-9 Form documents. Employers may not request more or different documents than are required to establish a worker's identity and eligibility to work in the United States and may not reject documents that appear to be reasonably genuine.
5. Retaining I-9 Forms improperly. Employers must retain I-9 Forms for as long as the employee is employed. Once terminated the employer must retain the I-9 Forms for either three years after the date of hire or one year after the date employment is terminated, whichever is later. Forms I-9 can be retained either on paper or electronically.
6. Not taking the I-9 Form process seriously. If using E-Verify implement a tentative non-confirmation policy. If you receive a tentative non-confirmation notice, print it out for your records and meet with the employee and go over the I-9 Form in depth so the employee is informed and understands what is going on. |
What would you like to see in a future issue?
Contact our office with your suggestions.
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On June 19th, the American Medical Association has officially recognized obesity as a disease. They are hoping it will lead doctors to take it more seriously and force insurance companies to pay more of the treatments that surround obesity. "Recognizing obesity as a disease will help change the way the medical community tackles this complex issue that affects approximately one in three Americans," AMA board member Patrice Harris, M.D., said in a statement. "The AMA is committed to improving health outcomes and is working to reduce the incidence of cardiovascular disease and type 2 diabetes, which are often linked to obesity."
One third of Americans are obese - and that's on top of the one-third who are overweight. Obesity is more than just a matter of carrying around too much fat, says Dr. Michael Joyner, an exercise physiologist at the Mayo Clinic in Rochester, Minn. The decision is expected to change how insurance companies cover obesity, opening up a wider range of treatment options for obese patients who may also have related health conditions such as type 2 diabetes, cardiovascular disease and certain types of cancers and disabilities.
The downside, the AMA says, is that people may expect they should be able to take a pill and cure obesity. But designating obesity as a disease could make it easier for policymakers to make changes. This has happened before with public health and with driving safety. With traffic safety, first speed laws, then requirements for vehicles to have seat belts and air bags helped reduce deaths, Joyner said. Now some policy measures are needed for obesity.
Employers may be required to cover obesity treatments for their employees and may be less able to discriminate on the basis of body weight. Keep in mind the AMA has no legal standing but are hoping it will lead doctors to take it more seriously. What do you think? Was this a good idea? Should the AMA have instead focused their thoughts on prevention? Will this cost us and our employers more money? Head over to our facebook page to discuss!
http://www.ama-assn.org/ama
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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 |
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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The site ("from the HR perspective" hence herein referred to as MFYCO.com) is made available by Michael F. Yates & Company Incorporated. All content, information and software provided on and through 'from the HR perspective' and MFYCO.com ("Content") may be used solely under the following terms and conditions ("Terms of Use".)
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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"Human Resources provides the leadership, supportive services, guiding principles, policies, structures and standards needed for a quality organization to survive in today's business environment."
MFYCO PRIVACY POLICY
Michael F. Yates & Company, Inc.
believes strongly in protecting the privacy of its users.
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Concluding Note
As always, any statements regarding federal tax law contained herein are not intended or written to be used, and cannot be used, for the purposes of avoiding penalties that may be imposed under federal tax law or to market any entity, investment plan or arrangement. |
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