Tech Flex. Topics Covered in this Issue:

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1 August 2013, Issue VIII Tech Flex Topics Covered in this Issue: Benefits: IRS Provides PCORI Fee Guidance Payroll: Kansas Amends Child Support Withholding Rules Minnesota Issues Guidance on Taxation of Education Benefits Taxation of Adoption Assistance Guidance Issued by Minnesota Rhode Island Increases Minimum Wage Bi-Weekly Wage Payment in Rhode Island Allowed Leave: Maryland Enacts Pregnancy Disability Leave Minnesota Sick and injured Child Care Leave Act Amended New Jersey Enacts Leave for Victims of Domestic or Sexual Violence Rhode Island Enacts Temporary Caregiver Benefits

2 IRS PROVIDES PCORI FEE GUIDANCE On July 25, 2013, the Internal Revenue Service (IRS) issued Questions and Answers regarding the annual fees required to be paid to assist in funding the Patient-Centered Outcomes Research Institute (PCORI) Trust Fund which were due on July 25, These fees, required under the Affordable Care Act (ACA) apply to policy and plan years ending after October 1, 2012 and before October 1, 2019 (i.e., for seven full policy or plan years). For calendar-year policies/plans, the fees would apply for calendar policy/plan years 2012 through 2018.) By way of background, the ACA created a new nonprofit corporation, PCORI, to support clinical effectiveness research. This entity is to be funded in part by fees paid by certain health insurers and applicable sponsors of self-insured health plans. The goal of PCORI is to assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings. The fee imposed on an insurer is based on the average number of lives covered under the policy and the fee imposed on a plan sponsor of a self-insured health plan is based on the average number of lives covered under the plan. The fee is $2.00 times the average number of covered lives (employees and dependents) during the policy or plan year (the multiplier is $1.00 in the case of policy or plan years ending before October 1, 2013). The fee will increase for subsequent years based on the percentage increase in the projected per capita amount of National Health Expenditures. The PCORI Fee Questions and Answers issued by the IRS provide guidance on the fee including the purpose, effective date, amount, and how to calculate. In addition, guidance is presented regarding the timing of fee payment and the form (IRS Form 720) required to be used when paying the fee. Finally, a link is provided where more indepth information regarding PCORI may be obtained. For a copy of the IRS PCORI Questions and Answers, please click on the link provided below. Questions-and-Answers 2

3 KANSAS AMENDS CHILD SUPPORT WITHHOLDING RULES As the result of the enactment of Kansas House Bill 2015 (HB 2015), effective July 1, 2013, the maximum amount that may be withheld from an employee s wages for child support is 50 percent of the employee s disposable income. Previously, Kansas had conformed to the federal limits under the Consumer Credit Protection Act (CCPA) which are 50 percent of the employee s disposable earnings if the employee is supporting another spouse and/or children, 55 percent if the employee is 12 weeks in arrears, 60 percent if the employee is not supporting another spouse and/or children and 65 percent if the employee is 12 weeks in arrears. In addition, HB 2015 requires that a payor who has been served a Title IV-D income withholding order that includes an amount to defray an arrearage must contact the Title IV-D agency at least 14 days prior to making payment of any lump sum amount to the obligor. The payor could pay the lump sum to the obligor once 14 days have passed after this contact, unless additional process or notice of the same has been received. Payor means any person or entity owing income to an obligor or any self-employed obligor and includes, with respect to a medical child support order, the sponsor or administrator of a health benefit plan. HB 2015 states in part as follows: A payor who has been served an income withholding order by the IV-D agency which includes an amount to defray an arrearage shall contact the IV-D agency no less than 14 days prior to making payment of any lump sum amount to the obligor. The payor may make payment of the lump sum to the obligor once 14 days have passed after providing such contact unless additional process, or notice of intended process, has been received. For a copy of HB 2014, please click on the link provided below: 3

4 MINNESOTA ISSUES GUIDANCE ON TAXATION OF EDUCATION BENEFITS The Minnesota Department of Revenue (DOR) issued guidance regarding the taxability of employer provided educational benefits. Because Minnesota did not conform to the federal American Taxpayer Relief Act of 2012 (ATRA) which extended the $5,250 a year educational benefit allowed under Section 127 of the Internal Revenue Code, most employer-provided education benefits unrelated to an employee s current job status are taxable for purposes of Minnesota state income tax. The guidance stipulates that effective January 1, 2013, most employer-provided education benefits that do not relate to an employee s current job are taxable for Minnesota for state income tax purposes. These Minnesota state taxable benefits generally include the cost of books, equipment, fees, supplies and tuition. The guidance provides in part: Effective immediately, you [employer] should withhold Minnesota income tax on employer-paid educational benefits unless those benefits: Maintain or improve skills needed for an employee s current job. This excludes education necessary to meet the minimum job requirements, or that qualifies an employee for new occupations, or Are provided to employees and their families of educational institutions for classes attended at the educational institution where they are employed. It is important to note that the DOR announcement also provided a number of frequently asked questions including the one below for a situation where employers had previously reimbursed or provided employees with educational assistance benefits and did not withhold taxes. What if I already provided taxable benefits this year for my employees and did not withhold? We recommend notifying your employees so they can increase their Minnesota withholding for the rest of the year to avoid a tax liability when they file their 2013 income tax return. For a copy of the announcement, please paste the following into your browser: tionassistance-.aspx 4

5 TAXATION OF ADOPTION ASSISTANCE GUIDANCE ISSUED BY MINNESOTA The Minnesota Department of Revenue (DOR) has issued guidance regarding the taxability employer provided adoption assistance benefits. The guidance stipulates that effective January 1, 2013; adoption assistance benefits provided to employees subject to Minnesota income are taxable wages subject to state income tax. Effective immediately, you [employer] should withhold Minnesota income tax on all adoption assistance benefits you provide to your employees. Although the federal American Taxpayer Relief Act of 2012 (ATRA) extended the taxfree adoption assistance of $12,970, Minnesota did not adopt this provision for state income tax purposes. However, employees may still exclude from federal taxable wages $12,970 in 2013 for adoption expenses paid to, or on behalf of, the employee. For a copy of the announcement, please paste the following into your browser: onbenefits.aspx RHODE ISLAND INCREASES MINIMUM WAGE The Governor of Rhode Island, Lincoln Chafee (I), has signed into law legislation (H 5079A) that increases the minimum wage in Rhode Island from the current rate of $7.75 per hour to $8.00 per hour effective January 1, Rhode Island s current minimum wage of $7.75 went into effect this past January and the last increase, prior to 2013, was in The $8.00 minimum wage will make Rhode Island s wage the third-highest in New England, tied with Massachusetts at $8.00 and behind Vermont at $8.60 and Connecticut at $8.25. The minimum wage is $7.50 in Maine and $7.25 in New Hampshire. The federal minimum wage, which has not changed since 2009, is $7.25. For a copy of H 5079A, please click on the link provided below: 5

6 BIWEEKLY WAGE PAYMENT IN RHODE ISLAND ALLOWED On July 17, 2013, Rhode Island Governor Lincoln D. Chafee (I) signed legislation (S. 980/H. 6065B) into law allowing Rhode Island businesses to pay employees on a biweekly basis if their average payroll exceeds 200 percent of minimum wage. It is important to note, however, that if employees are subject to collective bargaining, the written consent of the employees representative is required before a change in wage payment frequency may be made. The legislation becomes effective January 1, A press release by the Rhode Island Legislative Bureau stated the following: The legislation is aimed at addressing businesses concerns that Rhode Island s current law requiring weekly paychecks is burdensome, but also addresses the needs of workers living paycheck-to-paycheck. According to the American Payroll Association, Rhode Island is the only state that requires weekly wages for nonexempt private sector employees. For those companies whose average salary is not at least twice the minimum wage, employers may petition the Department of Labor and Training for the ability to pay biweekly if they show sufficient reason and post a surety bond in the amount of the highest biweekly payroll in the preceding year for the employees subject to the petition. For a copy of the press release announcing the enacted legislation, please click on the link provided below: For a copy of S. 980/H. 6065B, please click on the link provided below: 6

7 MARYLAND ENACTS PREGNANCY DISABILITY LEAVE Upon signature of Maryland House Bill 804 (HB 804), Governor Martin O Malley enacted into law legislation requiring employers to honor employee requests for reasonable accommodation for disabilities "caused or contributed to" by pregnancy. The law goes into effect on October 1, Under HB 804, reasonable accommodation may involve any of the following: Transferring the employee to a less strenuous or less hazardous position for a period of time up to the duration of the employee s pregnancy, under certain very specific conditions. Changing the employee s job duties. Changing the employee s work hours. Relocating the employee s work area. Providing mechanical or electrical aids. Providing leave. HB 804 permits employers to require health certifications supporting the need for reasonable accommodation and requires that information about employee rights to reasonable accommodation and leave must be posted conspicuously and included in any employee handbook. In addition, employers are required to post in a conspicuous location and to include in any employee handbook information concerning an employee s rights to reasonable accommodation and leave for a disability caused, or contributed to, by pregnancy. For a copy of HB 804, please click on the link provided below: 7

8 MINNESOTA SICK OR INJURED CHILD CARE LEAVE ACT AMENDED Effective August 1, 2013, the Minnesota Sick or Injured Child Care Leave Act (Section ) has been expanded via bill SF 840 to require Minnesota employers to allow an employee to use any sick leave benefits for absences due to an illness of or injury to the employee's child, adult child, spouse, sibling, parent, grandparent, or stepparent, for reasonable periods of time as the employee's attendance may be necessary, on the same terms upon which the employee is able to use sick leave benefits for the employee's own illness or injury. Previously employees were only allowed to use his/her sick leave benefits to care for their sick or injured children, who were either under the age of 18 or under the age of 20 if attending secondary school. Under the amended statute, employers can limit the amount of sick leave benefits due to an illness or injury of an adult child, spouse, sibling, parent, grandparent, or stepparent to no less than 160 hours in any 12-month period. However, no limitation can be imposed for the use of sick leave benefits due to the illness or injury of the employee s child, which includes a step child, and biological, adopted and foster child. The amended statute applies to only employers with 21 or more employees employed on at least one site, and applies only to accrued and available sick leave benefits paid to employees. It does not include short- or long-term disability benefits or other salary continuation benefits. For a copy of SF 840, please click on the link provided below: ssion_year=2013&session_number=0 8

9 NEW JERSEY ENACTS LEAVE FOR VICTIMS OF DOMESTIC OR SEXUAL VIOLENCE On July 17, 2013, New Jersey Governor Chris Christie enacted into law The New Jersey Security and Financial Empowerment Act (NJ SAFE Act) to assist victims of domestic violence and sexual assault. The law becomes effective on October 1, Under the NJ SAFE Act, an employee who is the victim of domestic or sexual violence may receive a maximum of twenty days of unpaid leave in the twelve months following the incident. The employee also may take leave to assist a child, parent, spouse, domestic partner, or civil union partner (hereinafter, "related individual") who is victim to such violence. The twenty-day leave period may be taken intermittently in intervals of no less than one day. The enacted legislation applies to private employers in the state of New Jersey that employ 25 or more employees. For an "employee" to be covered, he or she must be employed for at least twelve months by an employer and have worked a minimum of one-thousand hours during the immediately preceding twelve-month period. The NJ SAFE Act provides that an employee may take leave to: Seek medical attention for, or recover from, injuries caused by domestic or sexual violence to the employee or a related individual. Obtain services from a victim services organization for the employee or a related individual. Receive psychological or other counseling for the employee or a related individual. Engage in activities to increase the safety of the employee or related individual, such as temporarily or permanently relocating. Seek legal assistance or remedies to ensure the health and safety of the employee or related individual. Attend, participate in, or prepare for a related court proceeding concerning the employee or related individual. Employer Notification: The legislation requires that employers notify employees of their rights and obligations under the statute by posting a conspicuous notice in the workplace and using other "appropriate means" to keep employees informed. 9

10 Employee Notification: When it is foreseeable that leave will be necessary, employees must provide the employer with written notice. Notice should be provided "as far in advance as is reasonable and practical under the circumstances." In addition, the employer may request that the employee provide documentation of the domestic or sexual violence, which may take the form of: A domestic violence restraining order or other documentation of equitable relief. A letter or other written documentation from the county or municipal prosecutor documenting the domestic or sexual violence. Documentation of the conviction of the aggressor for the domestic or sexual violence. Medical documentation of the domestic violence or sexually violent offense. Certification from a certified Domestic Violence Specialist or the director of a designated domestic violence agency or Rape Crisis Center that the employee or related individual is a victim of domestic or sexual violence. Other documentation or certification by a social worker, member of the clergy, shelter worker, or other professional who has assisted the employee or related individual in coping with domestic or sexual violence. Non-compliance Penalties Under the NJ SAFE Act, an employer may not discharge, harass, or otherwise discriminate or retaliate against an employee who has taken or requested leave. An employee may bring a civil action against an employer within one year of an alleged violation of the law. All remedies in common law tort actions are available to the employee, as well as: A civil fine of between $1,000 and $2,000 for the employer's first violation and additional fines of up to $5,000 for each subsequent violation. An injunction to restrain the continued violation of the law. Reinstatement of the employee to the same or equivalent position. Reinstatement of full fringe benefits and seniority rights. Compensation for any lost wages, benefits or other remuneration. Payment of reasonable costs and attorney's fees. For a copy of S.2177, please click on the link provided below: 10

11 RHODE ISLAND ENACTS TEMPORARY CAREGIVER BENEFITS Rhode Island Governor Lincoln D. Chafee has signed into law Senate Bill 231(S.B. 231) that establishes a temporary caregiver insurance program within the state s temporary disability insurance program to provide benefits to workers who take time off for a seriously ill child, spouse, parent, or domestic partner, or to bond with a new child. The new temporary caregiver benefits are available for leave taken beginning January 1, Under the provisions of S.B. 231, an employee is eligible for temporary caregiver benefits for any week in which the employee is unable to perform his or her regular and customary work because he or she is doing either of the following: Bonding with a newborn child or a child newly placed for adoption or foster care with the employee or domestic partner. Caring for a child, a parent, parent-in-law, grandparent, spouse, or domestic partner with a serious health condition (subject to a waiting period under section during which employees can accrue sick time in accord with the employer s policy). Key definitions are as follows: "Child" means a biological, adopted, or foster son or daughter, a stepson or stepdaughter, a legal ward, a son or daughter of a domestic partner, or a son or daughter of an employee who stands in loco parentis to that child. "Newborn child" means a child under one year of age. Parent" means a biological, foster, or adoptive parent, a stepparent, a legal guardian, 18 or other person who stands in loco parentis to the employee or the employee's spouse or domestic partner when he/she was a child. "Spouse" means a party in a common law marriage, a party in a marriage conducted and recognized by another state or country, or in a marriage as defined by chapter "Serious health condition" means any illness, injury, impairment, or physical or mental condition that involves inpatient care in a hospital, hospice, residential health care facility, or continued treatment or continuing supervision by a licensed health care provider. 11

12 Key provisions of the temporary caregiver insurance program include those outlined below: Employees may use accrued sick time during eligibility waiting period in accordance with the policy of the individual's employer. In order to be eligible for benefits, an employee must be certified by a Qualified Healthcare Provider to be out of work for 7 consecutive days or more due to an illness or injury Temporary caregiver benefits shall be available only to the employee exercising his or her right to leave while covered by the temporary caregiver insurance program. An employee must file a written intent with their employer, with a minimum of thirty (30) days notice prior to commencement of the family leave. Temporary caregiver benefits shall be limited to a maximum of four (4) weeks in a benefit year. Employers must continue existing health benefits for the duration of the leave, but they may require employees to pay any portion of the cost they were required to pay before commencement of the leave. Upon expiration of the leave, employees are entitled to be restored to the position they held when the leave commenced, or to a position with equivalent seniority, status, employment benefits, pay, and other terms and conditions of employment, including fringe benefits and service credits that the employee had been entitled to at the commencement of leave. For leave for reason of caring for a seriously ill family member, an employee must file a certificate with the department with state s temporary disability insurance program. The certificate filed to establish medical eligibility of the serious health condition of the employee's family member must be completed by the family member's treating licensed qualified heath care provider. Employers may require the Temporary Caregiver Leave to run concurrently with the Family Medical Leave Act (FMLA) and the Rhode Island Family Parental and Family Leave Act. For a copy of Rhode Island Senate Bill 231, please click on the link provided below: 12

13 Please contact ADP National Account Services for further information at: th Ave. West Suite 600 Lynnwood, WA Phone: (425) Fax: (425) ADP National Account Services does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter is provided solely as a courtesy and should not be construed as legal advice. The information in this newsletter represents informational highlights and should not be considered a comprehensive review of legal and compliance activity. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and the specific facts related to your business. **Please note that the information provided in this document is current as of the date it is originally published.** 13