...from the HR Perspective

Human Resource Update

December 2015

Looking at 2016

Being an optimist, I believe that 2016 will see more opportunity than we have seen in the last few years, and 2017 even more. One of the wisest bits of advice I have heard is "Be careful of what you ask for, because you might get it". Assuming that what I am hoping for in 2016 becomes a reality, let's look at some of the things we might have to keep an eye on for 2016 and beyond.

Hold onto What You Have

As the economy awakes, the need for qualified employees will increase. To stay profitable in the down economy, companies reduced workforces but generally held onto their best employees. Hand in hand with that, the pay these really good employees received was not increased that much, if at all.

If you are heading a company that survived the doldrums and want to add employees now, you want to attract individuals with the same expertise and reliability as the ones who helped you through the tough times. Where do you find them? Do you look at those who have been laid off, or do you look at those working for other companies who have kept their skills honed and are up to date with the latest technology? My guess is that you will be seeking the latter. Now the question: If you are going to do that, will your competitors be doing the same?

This raises a host of concerns: How much do I have to pay to attract new employees? Will I have to add to my benefits programs? If I pay new employees a premium to join my company, what do I do for those who got me through the tough times - can I pay them less than the new employees and still retain them? More on that point: How do I prevent other companies from pirating my employees?

The Train is About to Leave the Station

Baby boomers are reaching retirement age. Many have delayed retiring due to concerns about the economy, depressed housing prices and marginally performing investments. Two things will influence baby boomers to start retiring more quickly: health and an improving economy. Be prepared for those who you have retained to retire. If the economy really turns around, you may have to run quickly to find replacements. Finding capable and experienced replacements may be a challenge as reduced and stagnant workforces prevented employees from increasing experience and knowledge through advancement in their careers. An in-house training program may help in this regard.

Succession planning, formerly limited to the upper management ranks, is now necessary at all levels.

Minimum Wage

Not to be outdone by the Federal government, States and even lesser jurisdictions, have enacted their own minimum wage laws. Others are considering action as well. While an increase in the minimum wage seems like a minor thing, it has caused companies to reduce hours, eliminate positions and some to consider going out of business. The ripple effect through the rest of the workforce is also a problem - even for those companies that do not employ minimum wage workers. For more discussion of this topic please see "Inflation and The Amazing Pen" in our March 2014 Newsletter.

Laws/Regulations/Executive Actions

With one party controlling the Presidency and another controlling Congress, the hope that no new laws will be passed that will hamper businesses becomes more real. However, that does not prevent regulations and Executive Actions from being enacted. Pay close attention to the National Labor Relations Board and the changes that may flow from it such as the redefinition of "exempt" and "non-exempt" employees and wider latitude unions may have to organize. Also watch for Executive Actions that may impose additional burdens to businesses in 2016 such as mandatory sick leave for employees of companies which contract with the Federal government.

Health and Healthcare

One way to control healthcare costs is to have healthier employees. Some companies have adopted wellness programs and others are considering them. The annual physical and immunizations that are now part of medical plans will help to control illnesses and their related costs, but only if they are used. Communication with your employees is critical to get them to use these benefits. Good health also lessens time off for sickness and consequent lost productivity. Consultation with your carrier will produce a projection of the additional costs associated with full use of the preventive care aspects of your plan vs. dealing with the consequences of a sicker workforce and their family members.

The Impact of Additional Taxes

Over the last few years we have seen additional taxes imposed on higher incomes. For joint filers in 2016: an additional 4.6% on income above $466,950 (35% to 39.6%), an additional 5% capital gains tax (15% to 20%), an additional Medicare tax 0.9% on pay over $250,000, 3.8% additional (Affordable Care Act) tax on net investment income for those joint filers with modified adjusted gross income over $250,000 (actually - more complicated than that), the phase out of the personal deduction and mortgage interest, state and local taxes paid and charitable donations. And these are just the additional taxes that impact a company's employment relation with its executives. If you have not recently done so, examining executive compensation plans to mitigate taxes should be a 2016 goal.

Tax and estate planning have always been two valuable perquisites for executives and are even more so today. If your company does not offer them, it may be a good move to provide them.

Remember, executives are subject to being pirated too!

Hello 2016!

We wish you, your family and associates a very Happy, Healthy and Successful New Year! Please let us know how we may assist you with any challenges and opportunities you have in 2016!

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

Mandatory Filing of IRS Forms 1094-B, 1095-B

MFYCO Facebook

New York - For 2016

Cadillac Tax

Four Health Insurance Changes to be on the Lookout for in 2016

Employee Benefit Plan Audits

eLaws Quick Link

2016 Retirement Plan Limits

Track Government Spending

Terms of Use

EXTENDED FILING DATES

- Are You Ready -

Mandatory Filing of IRS Forms 1094-B, 1095-B (self-insured) 1094-C and 1095-C

The mandatory filing of IRS Form 1094-C and 1095-C as part of the Affordable Care Act becomes effective January 1, 2016.

As reported in our June 2014 and October 2015 newsletter, if you have 50 or more employees you will need to file Form 1094-C (which is a summary of Form 1095-C) and a Form 1095-C for each employee by February 28, or March 31, of the year following the calendar year to which the return relates.

On December 28, the IRS extended the filing deadline dates.

For calendar year 2015, Forms 1094-C and 1095-C are now required to be filed by May 31, 2016 rather than February 29, 2016 or June 30, 2016 rather than March 31, 2016, if filing electronically. (Companies with 250 or more employees must file electronically.)

	Self-Insured Plan	Fully-Insured Plan
Non-Applicable Large Employer	Forms 1094-B and 1095-B	N/A
Applicable Large Employer (ALE)	Forms 1094-C and 1095-C Either 1094-B and 1095-B or Forms 1094-C and 1095C for non-employees	Part III will be disregarded for most.
Insurance Provider	N/A	Forms 1094-B and 1095-B

The following information is needed to file for non-self-insured employers. (Self-insured employers are required to file, however; the information that is required differs.)

Form 1094-C needs to include:

Company Information: name, EIN, contact person's name and phone number and company address and Total number of Form 1095-Cs submitted with transmittal.

Form 1095-C is used to report information about each of your employees. The information includes:

Part I - Employee personal information (address, Social Security Number) and Employer Information (name, address, EIN, phone)

Part II - Month health insurance coverage began; Code for Offer of Coverage; Employee's Cost of the lowest cost monthly premium, for Self-Only Minimum Value Coverage and Applicable Section 4980H Safe Harbor Code

Part III - (if self-insured) Listing of covered individuals including Social Security Number, Date of Birth and Covered Months

Penalties

Under the Trade Preferences Extension Act of 2015 (TPEA) which became law on June 29, 2015, there are significant increases in the penalties for making mistakes in information reporting for returns and statements that are required to be filed after December 31, 2015. Under the TPEA included penalties on applicable large employers for failing to file Affordable Care Act (ACA) information returns with the IRS starting in 2016, or failing to furnish employees with payee statements, as required by the ACA, regarding their health care coverage are increased, as follows:

* The basic penalty for failure to file or furnish a correct information return or payee statement will more than double from $100 to $250.

* The standard annual penalty cap will double from $1.5 million to $3 million.

* If the failure relates to both an information return and a payee statement, the penalties are doubled to $500 per statement with a $6 million cap.

The new penalties are effective with respect to returns and statements required to be filed after Dec. 31, 2015, which would include 2015 informational forms that must be filed with the IRS by May 31, 2016 (or by June 30, 2016, if filed electronically), and payee statements due annually to covered employees by Jan. 31.

It appears that it will not take much for the applicable penalties to be imposed. It looks as though minor mistakes, such as reporting dollar amounts that are less than $1 off or a mismatched payee's name and taxpayer identification number, could cause the penalties to be assessed.

Based on our reading, the act does not repeal reductions in penalties when corrections are made within a specified time, but increases these lower penalties as well. If a failure is corrected within 30 days after the filing date, the penalty will be $50; increased from $30. The total penalty that can be imposed in a calendar year when corrections are made during that 30 days is $500,000. If mistakes are corrected more than 30 days after the filing date but on or before Aug. 1, the penalty will be $100; increased from $60. The total penalty that can be imposed in a calendar year when corrections are made during that period is $1.5 million.

In preparation for reporting in early 2016, applicable large employers should have steps and infrastructure in place to gather information reflecting coverage being offered in plan year 2015, which can include monthly tracking of hours worked by employees.

Good-Faith Efforts

The one-year transition rule which provides that employers and insurers will not be subject to penalties for the first year of reporting if they made a good-faith effort to comply but filed incorrect or incomplete information applies. However, there is no relief for failure to timely file the required information returns with the IRS, or relief for failing to provide required statements to employees.

Instructions for filing Forms 1094-C and 1095-C can be found here.

If you need assistance in completing Forms 1094-C and 1095-C please contact us.

Invitation to MFYCO Facebook

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New York

Minimum Wage - beginning December 31, 2015 rates will increase to $9.00, fast food workers working in NYC increase to $10.50 and in the rest of the state fast food workers will receive $9.75 an hour.

Sexual Harassment Protection Expanded - Effective January 19, 2016, two bills recently passed will take effect in New York, will expand sexual harassment and discrimination protections for employees.

The Protect Victims of Sexual Harassment bill (S.2, 2015-2016 S. Reg. Sess. (N.Y. 2015)) - has amended the definition of "employer" to include all employers. This change allows employees of any size New York employer to file workplace sexual harassment complaints with the New York State Division of Human Rights, and
The Remove Barriers to Remedying Discrimination bill permits employees who prevail in sex discrimination lawsuits to recover attorneys' fees. An employer will be responsible for such fees only if it has been found liable for having committed an unlawful discriminatory practice.

The Achieve Pay Equity bill becomes effective January 19, 2016 and amends Section 194 of the New York Labor Law in the following areas:

Defense to Pay Discrimination Claims - under the new bill, the fourth justification was replaced with "a bona fide factor other than sex, such as education, training, or experience."

The undefined "bona fide factor" cannot be based on sex, and must be both job-related and consistent with business necessity, which the bill defines as "a factor that bears a manifest relationship to the employment in question." Even if an employer establishes such a "bona fide factor," however, an employee may still prevail on his or her claim by demonstrating three things: (1) that the "bona fide factor" has a disparate impact on one sex, (2) that there are alternative employment practices that would serve the same business purpose and would not create a pay differential; and (3) that the employer refused to adopt the alternative practice.

Compensation Comparison - Section 194 requires employers to provide equal pay to employees in the "same establishment" for equal work. The Achieve Pay Equity bill defines "same establishment" as workplaces for the same employer located within the same county.

Wage Disclosure - employers are no longer permitted to ban employees from discussions about pay. Employers may only, by means of a written policy distributed to all workers, "establish reasonable workplace and workday limitations on the time, place and manner for inquiries about, discussions of, or the disclosure of wages." An Employee's discussion about another employee's earnings may be prohibited by the employer, if prior permission from the employee was not obtained.

Penalty for Violation - employers who willfully violate Section 194 will now be liable for 300% of liquidated damages of the wages found to be due.

Cadillac Tax

On December 18, 2015, Congress passed and the President signed a TWO YEAR delay of the 40 percent excise tax on high-cost employer-sponsored health plans, also known as the "Cadillac Tax." The effective date was 2018 and is now 2020. The tax was originally non-tax deductible but the December 2015 changes make it tax deductible for employers who pay it.

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(It's a lot to think about!)

Four Health Insurance Changes to be on the Lookout for in 2016

1. Companies will scale back rich plans in preparation for 2020 (date was extended from 2018 on December 18, 2015.) 2016 is the year that many employers will begin pulling back on generous health plans. While some employers began doing this as early as 2014, you can expect that many more will be doing it in 2016. Recent studies show that nearly 50% of large employers (200 or more workers) will have at least one plan impacted by the Cadillac Tax in 2020. The Cadillac Tax taxes the cost of employer-sponsored coverage that exceeds caps of $10,200 for individuals and $27,500 for family coverage (will be updated before the 2020 effective date and indexed thereafter). If a premium exceeds either amount, the employer will face a 40% excise tax on that excess amount.

No employer wants to pay that stiff a penalty (even though it will now be deductible), but they also do not want to pull the rug out from employees who may be accustomed to a high level of benefits. To prevent shock in 2020 when employers will have to lower plan benefits or face the tax, they should begin scaling back plans in 2016 to ease into the changes.

2. The EEOC Likely Will Finalize Wellness Rules under the ADA and GINA. In 2016, we are expecting to see final regulations from the Equal Employment Opportunity Commission (EEOC) explaining how wellness plans can comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA.) While wellness programs have become increasingly popular, there has been litigation (and just general confusion) about precisely how employers can design these programs in a nondiscriminatory way. In 2015, the EEOC released proposed rules under both the ADA and GINA that challenged employers by setting new incentive limitations and disclosure requirements on wellness plans. Final rules developed in 2016 are expected to clarify some of the remaining questions about these proposed rules.

For example, final rules under the ADA will likely clarify how the new 30% cap on wellness incentives (imposed on wellness plans with "medical examinations" or "disability-related inquiries") will apply to employees' spouses and to different tiers of coverage under the associated group health plan.

3. Guidance will help employers comply with nondiscrimination rules. New rules under the Affordable Care Act outlining nondiscrimination testing requirements for fully insured health plans are expected to be released in 2016. Employers with fully insured plans may need to move quickly to develop new eligibility rules or reduce benefits if their existing plans favor highly compensated management or executives by offering them benefits or plans that are not available to all qualified employees. This nondiscrimination requirement was originally scheduled to take effect in 2010, but was delayed indefinitely until the IRS issued regulations or guidance on how to comply with the rules. The wait is likely nearing an end as Treasury officials have informally commented that guidance will be released before the end of 2016.

4. More employers will be forced to pay or play. Additional rules regarding pay or play go into effect on January 1, 2016, as employers with 50 or more full-time employees, including full-time equivalents, become subject to the rules. This is a much larger group of employers. Last year, employers with between 50-99 full-time employees and full-time equivalents were not required to comply with pay or play, assuming they satisfied certain transition rules. Additionally, the pay or play rules will get harder in 2016. Employers must offer minimum essential coverage to at least 95% of their full-time employees and their dependents to avoid the ACA's large penalty. In addition, 2016 is the first year the IRS will penalize employers for not complying. Specifically, the IRS will begin assessing employers with penalties in 2016 for noncompliance in the 2015 calendar year. For some employers, this means hundreds of thousands of dollars - and maybe even millions of dollars - in penalties.

What would you like to see in a future issue?

Contact our office with your suggestions.

email: info@mfyco.com

Employee Benefit Plan Audits

The Employee Benefit Security Agency (EBSA) of the Department of Labor has set its sights on a new compliance issue -- the quality of your employee benefit plan audit. The EBSA recently sent out the following letter to plan administrators:

"Dear Plan Administrator:

We are sending you this email because you may be in the process of selecting or working with a CPA firm to audit your qualified retirement plan's 2015 financial statements that will be submitted to the Department of Labor (DOL) as part of the Plan's Form 5500 filing. Selecting a qualified CPA who has the expertise to perform an audit in accordance with professional auditing standards is a critical responsibility in safeguarding your plan's assets and ensuring your compliance with ERISA's reporting and fiduciary requirements.

Substandard audit work can be costly to plan administrators and sponsors. It both jeopardizes plan assets and can result in significant civil penalties being imposed on the plan administrator by the DOL. A recent study conducted by the Department of Labor found serious problems with nearly 40% of employee benefit plan audits. (Click here to read the entire study.)

A quality audit will help protect the assets and financial integrity of your Plan and help to ensure that the necessary funds will be available to pay the benefits promised to your Plan's participants and their beneficiaries. It also helps make sure your Plan is in compliance with the law.

Employee benefit plan audits have unique audit and reporting requirements and are different from other financial audits. Care should be taken by the plan administrator to select a CPA who possesses the requisite knowledge of plan audit requirements and expertise to perform the audit in accordance with professional auditing standards. To ascertain the qualifications of a CPA firm to perform your Plan's audit you might want to consider the following factors:

The number of employee benefit plans the CPA audits each year, including the types of plans;
The extent of specific annual training the CPA received in auditing plans;
The status of the CPA's license with the applicable state board of accountancy;
Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy or the American Institute of CPA's for investigation; and
Whether or not your CPA's employee benefit plan audit work has recently been reviewed by another CPA (this is called a "Peer Review") and, if so whether such review resulted in negative findings."

As we approach the next filing season for qualified retirement plans, you can find additional tips for selecting an auditor and monitoring your auditor's work in the EBSA pamphlet "Selecting an Auditor for Your Employee Benefit Plan."

The EBSA would like to discuss with you the importance of a quality audit for your plan, you may contact the EBSA at PlanForAuditQuality@dol.gov if you have comments or questions.

Quick Link to 'elaws'

2016 Retirement Plan Limits

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

If you have not received our business card with these numbers printed on it and would like one, please let us know! We would be happy to mail you one (or a few to share!)

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!

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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."

American Recovery and Reinvestment Act of 2009 information can be found by clicking here.

Michael F. Yates & Company, Inc.
_________________

101 Belvidere Avenue
P.O. Box 7

Washington, NJ 07882-0007

908-689-4200

fax: 908-689-6300

email: info@mfyco.com

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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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.