...from the HR Perspective

Human Resource Update

November 2015

Catch Them While You Can!

Social Security Features That Are Expiring Soon

As the result of the latest budget act signed by the President, there are two Social Security features that will be expiring soon. Both apply to married couples and in some ways permitted them to have their cake and eat it too.

File and Suspend

The first feature is called "file and suspend" and is expiring May 1, 2016. As you will see, this strategy permits: a) one spouse to delay receiving benefits until age 70 to take full advantage of the 8% per year increase from age 66 to 70, and b) the other spouse to receive spousal benefits now, and later at age 70 if his/her own benefit is higher, to receive that benefit with an 8% per year increase.

Let's look at how "file and suspend" works:

Both spouses must be at full retirement age - age 66.
Let's call one spouse "Spouse 1" (typically the working spouse, or the spouse with the higher income if both are working) and the other "Spouse 2".
Spouse 1 files for Social Security benefits and immediately suspends them.
Spouse 2 immediately files for the spousal benefit (1/2 of Spouse 1's full retirement age benefit) and starts to receive that benefit.
Spouse 1 delays receipt of his/her benefit until age 70 in order to maximize the benefit (the benefit grows by 8% per year from age 66 to age 70).
Once an individual reaches age 70, the benefit stops growing by the 8%.
When Spouse 1 reaches age 70, he/she starts his/her benefit.
When Spouse 2 reaches age 70, he/she either continues to receive the spousal benefit or, if higher, starts to receive a benefit based on his/her own earnings increased by the 8% per year.

The change: On and after May 1, 2016, no spouse will be able to collect benefits based on a spouse who has suspended benefits until that spouse commences benefits.

Some Notes:

If Spouse 1 dies, Spouse 2 will receive the benefit Spouse 1 would have received, or was receiving if Spouse 1 had started the benefit.
Each couple should thoroughly review how they may benefit before using this strategy, as a spouse whose life expectancy is compromised might argue for not suspending benefits.
Other benefits may be affected by this strategy including but not limited to dependent or disabled child care benefits. Please contact your local social Security for information regarding all other benefits.

Restricted Application

The second feature is called "restricted application", and while incorporated in the above "file and suspend" description, is actually a separate feature. Under this feature, a spouse who has reached full retirement age (66) and whose own benefit at age 70 will be larger than the spousal benefit, may first start the spousal benefit at age 66 and delay receipt of his/her own benefit until age 70 to get the full effect of the 8% per year increase.

The change: Even though the file and suspend feature expires on May 1, 2016, this feature will continue for anyone who is age 62 or older before the end of 2015. If you are younger than 62, this feature will no longer be available.

Must Contact Social Security

Nothing our government does is simple and easy to understand. We have attempted to provide an overview of these changes. It is mandatory that you contact Social Security to understand how these changes will affect you and your spouse.

Retirement Planning

Social Security is only part of retirement planning. We are ready to assist you and your organization in designing, valuing, administering and communicating your retirement programs. Please call if you have any questions about your plans or would like to know if you can improve them.

Sincerely,

Michael F. Yates

President

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.

In This Issue

Eight Office Policies that Drive Workers Crazy

MFYCO Facebook

Internal Controls are Essential in Retirement Plans

Alcohol Abuse

2016 Retirement Plan Limits

Track Government Spending

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Track Government Spending

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Eight Office Policies that Drive Workers Crazy

Trust is a key component to building a better workplace culture. Yet HR policies can sometimes be redundant, outdated and may even cause distrust between employees and company leaders. Travis Bradberry, president of TalentSmart and co-author of Emotional Intelligence 2.0, shares why it might be time to take another look at editing that employee handbook.

Restricting Internet use

Yes, there are sites that should not be allowed at work, but Facebook and Twitter are not among those. "People should be able to kill time on the Internet during breaks," says Bradberry. "Many companies restrict Internet activity so heavily that it makes it difficult for people to do online research. The most obvious example? Checking the Facebook profile of someone you just interviewed [for a position]."

Ridiculous attendance, leave and time off requirements

Salaried employees are paid for the work they do, not necessarily the hours they put in. If an employee is dinged for showing up five minutes late, even if they routinely stay late and put in time on the weekend, "you send the message that policies take precedence over performance," Bradberry says.

Draconian email policies

"Some companies are getting so restrictive with email use that employees must select from a list of pre-approved topics before the email software will allow them to send a message," says Bradberry. "If you don't trust your people to use email properly, why did you hire them in the first place?"

Limiting bathroom breaks

"When you limit basic personal freedoms by counting people's trips to the bathroom, they start counting their days at the company," Bradberry says.

Stealing employees' frequent flyer miles

Not allowing employees to keep miles for personal use is a greedy move that fuels resentment. "Work travel is a major sacrifice of time, energy and sanity," he says. "Taking employees' miles sends the message that you don't appreciate their sacrifice and that you'll hold on to every last dollar at their expense."

Forced rankings of performance

Pre-determined ranking systems can make employees feel like they're just a number, can incorrectly evaluate people and can even create insecurity and dissatisfaction when employees fear that they'll be reprimanded due to the forced system, believes Bradberry. "It's an example of a lazy policy that avoids the hard and necessary work of evaluating each individual objectively, based on his or her merits," he says.

Banning mobile phones

Managers need to be trained to deal effectively with employees who underperform and/or don't meet expectations because they spend too much time on their phones. The easy, knee-jerk alternative (banning phones) demoralizes good employees who may need to check their phones periodically for family or health reasons or as an appropriate break from work, says Bradberry.

Shutting down self-expression

Dictating how many family photos can be on a desk, or the use of water bottles and personal coffee mugs is the wrong approach, Bradberry notes. Obviously a life-size poster of Fabio is probably a bit much, but regulating personal touches in the workplace goes too far, he says.

Think your office might be suffering from some of these above policies? Contact MFYCO to see how we can work together and make your policies better!

Article courtesy of Employee Benefit Adviser

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FROM THE IRS

Internal Controls are Essential in Retirement Plans

"An ounce of prevention is worth a pound of cure" definitely applies to keeping retirement plans tax-qualified. Effective internal controls and annual reviews of your plan are essential "ingredients" to prevent costly mistakes that can jeopardize the plan's tax-favored status. Unfortunately, retirement plan audits and voluntary correction submissions often reveal that plans don't have needed internal controls in place or they aren't administered properly.

Benefits to having strong internal controls

Having effective practices and procedures to prevent compliance problems is a basic requirement to be eligible to use the Self-Correction Program. You can self-correct insignificant operational errors at any time and preserve the tax-favored status of the plan without having to pay any fees.

When auditing a retirement plan, the revenue agent begins by evaluating the plan's internal controls to determine whether to perform a focused or expanded audit. In addition, if the agent finds plan errors, the strength of internal controls is a factor in the negotiation of the sanction amount under the Audit Closing Agreement Program. The agent will make every effort to ensure that the plan has internal controls in place when the audit concludes.

Please note that hiring a service provider doesn't relieve you of the responsibility of keeping your plan in compliance. Problems typically occur when there's a communication gap between you and the plan administrator about what the plan document provides and what documentation is needed to ensure compliance.

Common mistakes

These mistakes commonly result from communication problems between the plan sponsor and administrator.

(1) Failure to timely amend the plan or to follow the terms of the plan

It's common during audits that an employer can't locate documentation to prove the plan was timely amended for current law. This results in an audit closing agreement under Audit CAP. If the error had been discovered through an annual review of the plan document before the plan was audited, the plan sponsor could have filed a much less expensive Voluntary Correction Program submission to bring the plan current with all law changes (self-correction isn't available for document failures.)

When you change your plan document, you should also make corresponding changes to the summary plan description and communicate the changes to plan participants. It's also important to share changes made to the plan with all persons who provide service to the plan. For example, if the plan's definition of compensation is changed, you should communicate this change to anyone involved in determining deferral amounts, performing nondiscrimination tests or allocating contributions.

(2) Failure to review in-service, termination, and loan distribution forms to make sure they follow the plan terms

Many plan vendors use the same distribution forms for all of the plans they administer despite the fact that individual plans may have different distribution options and requirements. Using a generic form can lead to incorrect distributions and incorrect tax reporting.

(3) Failure to count all eligible employees in testing

Plan sponsors often fail to share information with the plan administrator on all employees:

eligible to make an elective deferral, including those terminated during the year, or
of a related company with common ownership interests.

These employees may be eligible to participate in the plan and, therefore, may need to be included in the various tests.

Free tools

The tools on the IRS website can help you strengthen your plan's internal controls.

Page Last Reviewed or Updated by IRS: 24-Nov-2015

Alcohol Abuse

What should we as HR professionals due when an employee's behavior and job performance is affected due to alcohol abuse.

We all know we can't treat employees with alcohol problems in any manner that we want because alcoholism is a protected disability under the federal Americans with Disabilities Act (ADA). Blatantly firing someone who you know or suspect is abusing alcohol could be setting you up for an ADA claim. That being said, our hands are not tied. By instilling clear policy guidelines, that explain what is expected, for example: stating the quantity and quality of work that must be produced, timeliness, absenteeism, insubordination, or on the job accidents, drug and alcohol free work place, etc. and holding all employees accountable and disciplining each who fail to meet the expectations consistently will go a long way when faced with an employee who is or suspected of abusing being an alcohol.

The Equal Employment Opportunity Commission (EEOC) agrees that unsatisfactory behavior and poor job performance does not need to be tolerated if similar behavior or performance is considered unacceptable for other employees. Click here for more info.

Who are more likely to lose an ADA claim?

Employers who consistently enforce their rules can do so even if an employee claims that the reason for their rules violation is alcohol. However, employers who maintain a lax attitude regarding policy guidelines, rules, etc. and don't enforce their policies equally will face ADA liability since they are treating the affected employee differently than other employees who break rules.

Disciplinary Solutions:

Before taking the traditional disciplinary process or firing an employee examine the situation and see if one of the following options may be a better solution:

Steer worker towards an Employee Assistance Program. This optional route allows you to help your employee if you believe rehabilitation will work for you and the employee. Keep in mind as long as you show objective documentation that the employee appeared to be under the influence of alcohol, you are not acting solely based on speculation or innuendo, you are putting yourself in the best possible position. You need not conclude why the employee is acting erratically; just make sure to document your thought process and actions.
Enter a "firm choice" or "last chance agreement". Generally, under a "firm choice" or "last chance agreement" an employer agrees not to terminate the employee in exchange for an employee's agreement to receive substance abuse treatment, refrain from further use of alcohol or drugs, and avoid further workplace problems. A violation of such an agreement usually warrants immediate termination because the employee failed to meet the conditions for continued employment.
If an employee raises an unknown alcohol problem while you are about to terminate, you can still proceed with the action if it would have also been imposed on an employee with a non-alcohol related infraction. However, if the discipline is less than termination, you may ask about the disability's relevance to the misconduct, or if the employee thinks there is an accommodation that could help him/her avoid future misconduct. If an accommodation is requested, you should begin an "interactive process" to determine whether one is needed to correct a conduct problem, and, if so, what accommodation would be effective. You may seek appropriate medical documentation to learn if the condition meets the ADA's definition of "disability," whether and to what extent the disability is affecting the employee's conduct, and what accommodations may address the problem. Possible reasonable accommodations may include a modified work schedule to permit the employee to attend an on-going self-help program.

You, as the employer, cannot refuse to discuss the request or fail to provide reasonable accommodation as a punishment for the conduct problem. If a reasonable accommodation is needed to assist an employee with a disability in controlling his/her behavior and thereby preventing another conduct violation, and you refuse to provide one that would not cause undue hardship, then you have violated the ADA.

Example: An employer has warned an employee several times about her tardiness. The next time the employee is tardy, the employer issues her a written warning stating one more late arrival will result in termination. The employee tells the employer that she is abusing alcohol, her late arrivals are due to drinking on the previous night, and she recognizes that she needs treatment. The employer does not have to rescind the written warning and does not have to grant an accommodation that supports the employee's drinking, such as a modified work schedule that allows her to arrive late in the morning due to the effects of drinking on the previous night. However, absent undue hardship, the employer must grant the employee's request to take leave for the next month to enter a rehabilitation program.

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2016 Retirement Plan Limits Are Here!!

All limits are based on the calendar year.

	2016	2015	2014
Maximum Annual Defined Benefit	$210.000	$210,000	$210,000
Maximum DC Annual Addition ($$)	$ 53,000	$ 53,000	$ 52,000
Maximum 401(k) Deferrals	$ 18,000	$ 18,000	$ 17,500
Older EE Catch-Up Contribution	$ 6,000	$ 6,000	$ 5,500
Maximum Plan Compensation	$265,000	$265,000	$260,000
Highly Compensated Threshold	$120,000	$120,000	$115,000
Key Employee in a Top-Heavy Plan	$170,000	$170,000	$170,000
Income Subject to Social Security Tax	$118,500	$118,500	$117,000
PBGC Maximum Monthly Guarantee*	$5,011.33	$5,011.33	$4,943.18
Maximum DC Annual Addition (%)	100%	100%	100%
Social Security Tax - Employee	6.2%	6.2%	6.2%
Social Security Tax - Employer	6.2%	6.2%	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	Includes Deferrals	Includes Deferrals
Life Annuity at age 65 * Individuals with earned income over $200,000 pay an additional 0.9% in Medicare taxes

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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.
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