Tech Flex. December 2014, Volume XII NATIONAL ACCOUNT SERVICES

Transcription

1 Tech Flex December 2014, Volume XII NATIONAL ACCOUNT SERVICES

2 Topics Covered In This Issue Benefits: IRS Updates Guidance on Transportation Benefits and Electronic Media 2015 Medical Mileage Rated Announced by IRS Payroll: IRS Releases 2015 Automobile Business Use Mileage Rates 2015 Form W-4 Released by IRS 2015 Publication 15-B Released Colorado Increases Minimum Wage and Amends Other Wage Payment Rules Leave: California Provides Paid Sick Leave Guidance Oregon Family Medical Leave Act Amended

3 3 IRS UPDATES GUIDANCE ON TRANSPORTATION BENEFITS AND ELECTRONIC MEDIA On November 21, 2014, the Internal Revenue Service (IRS) published Revenue Ruling (Rev Rul ) providing guidance on the use of smartcards, debit or credit cards, or other electronic media to provide qualified transportation fringe benefits to employees. Under the ruling, after Dec. 31, 2015, employers may no longer provide qualified transit fringe benefits under a bona fide cash reimbursement arrangement in cases in which a terminal-restricted debit card is the only readily available transit pass in the employer's geographic area. In addition, Rev Rul addresses the use by employees of debit cards for paying mandatory delivery fees on transit passes. By way of background, the IRS published Revenue Ruling expressly permitting the use of electronic media to provide employees with transportation benefits. Although the IRS generally approved the use of cards by employers to provide tax-free benefits to its employees under a qualified transportation benefit plan, there are a number of conditions that must be met in order for card use to fulfill the required expense substantiation rules as outlined in the applicable statute and regulations. As more fully described below, the use of a card as part of a qualified benefit plan is permitted under Revenue Ruling if two key elements are met: card use must be a bona fide reimbursement arrangement, and the card must constitute a qualified transit voucher. Bona Fide Reimbursement Arrangement In order to qualify as a qualified transportation benefit plan, the reimbursement method must be made under a bona fide reimbursement arrangement as defined under Treas. Reg (b) Q/A 16(a). The regulations specify that the reimbursement must be made on or after the date an expense has been paid or incurred. An arrangement that is dependent solely on the employee certifying in advance that employee will incur expenses at a future date is not allowable. In addition, the employer must implement reasonable procedures to ensure that the amount equal to the reimbursement was incurred for eligible expenses. Reasonable procedures include the collection of receipts from employees. It is considered to be reasonable, where receipts are not provided in the ordinary course of business by a service provider, to depend on an employee s certification AND where the employer has no reason to doubt the employee s certification. Qualified as Transit Voucher A qualified transportation benefit includes the option of providing cash reimbursement by an employer to an employee for transit benefits UNLESS a transit voucher or a similar item that may be exchanged only for transit pass is readily available. A voucher will be considered readily available if the average annual fare media charges that the employer reasonably expects to incur for transit system vouchers purchased from the voucher provider, excluding reasonable and customary delivery charges imposed by the voucher provider, are not more than 1% of the average annual value of the vouchers for the transit system. If a transit voucher is readily available to the employer, an employer is precluded from utilizing a cash reimbursement method. In such a situation, the employer must distribute vouchers to its employees.

4 4 Updates Made by Rev Rul Rev Rul updated the previous guidance on the use of smartcards, debit or credit cards, or other electronic media to provide qualified transportation fringe benefits to employees by way of eight detailed situations describing different types of employer transportation benefit programs. Some of the highlights are as follows: In a partial reversal of Revenue Ruling employers after December 31, 2015, may no longer provide qualified transit fringe benefits under a bona fide cash reimbursement arrangement in cases in which a terminal-restricted debit card is the only readily available transit pass in the employer's geographic area. Delivery charges incurred when obtaining transit passes online are now excludable from income, subject to the monthly statutory limit. The amount of the fringe benefit which may be excluded from an employee's gross income and wages for 2014 is limited to $130 per month for the aggregate of transportation in a commuter highway vehicle and transit passes, and $250 per month for qualified parking. For a copy of Revenue Ruling please click on the link provided below MEDICAL MILEAGE RATE ANNOUNCED BY IRS Transportation expenses, such as automobile mileage, that qualify as tax deductible medical expenses under Internal Revenue Code Section 213 generally can be paid or reimbursed on a tax-free basis by a health flexible spending arrangement, health reimbursement arrangement, or health savings account if the expense is primarily for, and essential to, medical care. On December 10, 2014, the Internal Revenue Service issued Notice announcing that the standard mileage rate, effective January 1, 2015, for use of an automobile to obtain medical care is 23 cents per mile. This represents a decrease of one-half cent from the 2014 rate of 23.5 cents per mile. For a copy of Notice please click on the link provided below:

5 5 IRS RELEASES 2015 AUTOMOBILE BUSINESS USE MILEAGE RATES On December 10, 2014, the Internal Revenue Service issued via Notice the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, and moving purposes. As of January 1, 2015, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be: 57.5 cents per mile for business miles driven; 23 cents per mile driven for moving purposes; and 14 cents per mile driven in service to a charitable organization versus 2014 Mileage Rates: Type of Mileage Driven 2015 Rate 2014 Rate Difference Business miles 57.5 cents per mile 56 cents per mile +1.5 cents per mile Moving miles 23 cents per miles 23.5 cents per mile -0.5 cents per mile Service of charitable organization 14 cents per mile 14 cents per mile No change The standard mileage rates for business and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. The mileage rate for charitable miles is set by statute and remains at 14 cents per mile. For a copy of Notice please click on the link provided below FORM W-4 RELEASED BY IRS The Internal Revenue Service released the 2015 version of the Employee s Withholding Allowance Certificate (commonly known as Form W-4). Form W-4 provides the information necessary for the employer to determine the amount to withhold from the employee s wages for federal income tax (FIT). The information provided on Form W-4 includes the number of withholding allowances the employee is claiming, his or her marital status and any additional amounts the employee wishes to have withheld. This information in conjunction with the withholding methods and tables presented in Publication 15 determine the amount of FIT that should be withheld from an employee s pay. The 2015 Form W-4 Instructions stated in part as follows: If you are exempt, complete only lines 1, 2, 3, 4, and 7 and sign the form to validate it. Your exemption for 2015 expires February 16, For a copy of the 2015 Form W-4 and Instructions, please click on the link provided below:

6 PUBLICATION 15-B RELEASED The Internal Revenue Service (IRS) has released the 2014 version of Publication 15-B (Employer's Tax Guide to Fringe Benefits), which contains information for employers on the employment tax treatment of various fringe benefits, including accident and health coverage, adoption assistance, company cars and other employer-provided vehicles, dependent care assistance, educational assistance, employee discount programs, groupterm life insurance, moving expense reimbursements, health savings accounts (HSAs), and transportation (commuting) benefits. (Publication 15-B uses the term "employment taxes" to refer to federal income tax withholding as well as Social Security and Medicare (FICA) and federal unemployment (FUTA) taxes.) Publication 15-B is a supplement to Publication 15 (circular E). A few of the highlights under What s New are as follows: Cents-per-mile rule. The business mileage rate for 2015 is 57.5 cents per mile. You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee. Qualified parking exclusion and commuter transportation benefit. For 2015, the monthly exclusion for qualified parking is $250 and the monthly exclusion for com-muter highway vehicle transportation and transit passes is $130. Contribution limit on a health flexible spending arrangement (FSA). For plan years beginning after December 31, 2014, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,550. For a copy of IRS Publication 15-B Employer's: Tax Guide to Fringe Benefits (For Benefits Provided in 2015), please click on the link provided below: COLORADO INCREASES MINIMUM WAGE AND AMENDS OTHER WAGE PAYMENT RULES As a result of the adoption of Colorado Minimum Wage Order No. 31 (Order), the Colorado Department of Labor and Employment has increased the state minimum wage to $8.23 per hour effective January 1, The current minimum wage is $8.00 per hour. Also on January 1, 2015, the state minimum wage for tipped employees will increase from $4.98 to $5.21 per hour. Additionally, the Order amended rules in relation to recordkeeping, recovery of wages and the statute of limitations to pursue wage payment violations. All amendments are effective as of January 1, 2015 as follows: Recordkeeping requirements: Rules amended to require employers to retain information contained in the employee s itemized earnings statement for a period of at least three (3) years after the wages or compensation were due. Currently, employers must keep such records for at least two (2) years. The records must include (1) the employee s name, address, social security number, occupation and date of hire; (2) the employee s date of birth, if under the age of 18; (3) a daily record of all hours worked; (4)

7 7 a record of allowable credits and declared tips; and (5) the regular rates of pay, gross wages earned, withholdings made and net amounts paid each pay period. Recovery of wages: Rules amended to provide that an employee receiving less than the minimum wage applicable to that employee would be entitled to recover in a civil action the unpaid balance of the full amount of the minimum wage, together with reasonable attorney fees and court costs, notwithstanding any agreement to work for a lesser wage.. Alternatively, an employee would be able to elect to pursue a minimum wage complaint through the division s administrative procedure. Statute of limitations for filing a complaint changed: Currently, a person may register a written complaint with the Division alleging a violation of the Minimum Wage Order within two (2) years of the violation. The Order provides an exception that all actions for a willful violation must be commenced not later than three (3) years after the cause of action accrues, but not after that time. For a copy of Colorado Minimum Wage Order No. 317 (CCR ) please paste the following into your browser. 20Rules% pdf CALIFORNIA PROVIDES PAID SICK LEAVE GUIDANCE As noted in the September 2014 Tech Flex, California Governor Edmund G. Brown signed into law the Healthy Workplaces, Healthy Families Act of 2014 (AB 1522) on September 10, 2014, which provides paid sick day to roughly 40% of the state s workforce. The bill specifically requires employers to provide paid sick leave to employees who work 30 or more days within a year from commencement of employment. The employer must permit such employees to earn a minimum of one hour of paid sick leave for every 30 hours worked. The law goes into effect on July 1, For more detailed information regarding AB 1522 please see the September 2014 Tech Flex (link below) article titled California Enacts Paid Sick Leave Bill. The California Division of Labor Standards Enforcement (DLSE) has now released the following guidance on AB Workplace Poster: A new poster template has been released designed to notify California employees of their paid sick leave rights. This poster must be posted in the workplace no later January 1, For a copy of the poster please paste the following into your browser. df

8 8 Updated Notice to Employee (New Hire Notice): The guidance updates the Notice to Employee to explain how sick leave is provided. The revised Notice to Employee (link below) must be used as of January 1, The template adds four check boxes so that an employer can indicate how paid sick leave is provided to the employee or if applicable, that the employer is exempt from the paid sick leave requirement. For a copy of the Notice to Employee please paste the following into your browser. Frequently Asked Questions (FAQ): The DLSE has posted an FAQ document addressing a number of provisions under AB 1522 to assist employers with their compliance with the new rules. A few examples are as follows: Q: Why does the law take effect January 1, 2015 if I don t begin accruing until July 1, 2015? A: The different dates are a result of the general effective dates of new legislation (on January 1 following enactment of the law) and the way the law was drafted making some of its provisions operative on a specified date (July 1, 2015). Both the qualifying periods that determine which employees are eligible for paid sick leave and the employee notice required by Labor Code become effective on January 1, 2015, but the law provides that entitlement does not begin until July 1, Q: What can I use sick leave for? A: You can take paid leave for you or a family member for preventive care or care of an existing health condition or for specified purposes if you are a victim of domestic violence, sexual assault or stalking. Family members include the employee s parent, child, spouse, registered domestic partner, grandparent, grandchild, and sibling. Preventive care would include annual physicals or flu shots. For partial days, your employer can require you to take at least two hours of leave, but otherwise the determination of how much time is needed is left to the employee. Q: When I take paid sick leave, will I get paid as I normally do for the applicable pay period? A: The new law requires that an employer provide payment for sick leave taken by an employee no later than the payday for the next regular payroll period after the sick leave was taken. This does not prevent an employer from making the adjustment in the pay for the same payroll period in which the leave was taken, but it permits an employer to delay the adjustment until the next payroll. For example, if you did not clock in for a shift and therefore were not paid for it but utilized your paid sick leave, your employer would have to pay you not later than the following pay period and account for it in the wage stub or separate itemized wage statement for that following regular pay period.

9 9 Q: How much will I get paid? A: You must be paid at your regular hourly rate. If your pay fluctuates - for example, if you get a commission or piece rate - your employer will divide your total compensation for the previous 90 days by the number of hours worked and pay you that rate. For a copy of the complete FAQ document please click on the link provided below. OREGON FAMILY MEDICAL LEAVE ACT AMENDED The Oregon Bureau of Labor and Industries (BOLI) have adopted temporary rules that amend the regulations pertaining to the Oregon Family Leave Act (OFLA) and the Oregon Victims of Certain Crimes Leave Act (OVCCLA). These revised rules are effective as of November 20, 2014 through May 15, 2015, or until adopted as permanent, whichever comes first. The temporary changes to OFLA and OVCCLA are as follows: OFLA Definition of Child: Prior to this change, for the purpose of parental and sick child leave, the child was required to be under the age of 18 or an adult dependent child substantially limited by a physical or mental impairment. Under the new rule, sick child leave may now be taken for adult children (without physical or mental impairments), as well as minor children. The new rules also clarify that bereavement leave may be taken for the death of a minor or adult child. Definition of Family Member: The new rules add step parent to the definition of a family member. Definition of Spouse: The definition of spouse has been updated to include:: (a) Individuals in a marriage recognized under state law in the state in which the marriage was entered into; (b) Individuals in a common law marriage that was entered into in a state that recognizes such marriages; (c) Individuals who have lawfully established a civil union, domestic partnership or similar relationship under the laws of any state. Individuals described in this subsection are not required to obtain a marriage license, establish a record of marriage or solemnize their relationship.

10 10 OVCCLA Definition of Immediate Family: The definition of immediate family is amended to remove the words father and mother and add: o Custodial, non-custodial, adoptive, foster, biological, and step- parent; o Parent-in-law, parent of domestic partner; o Grandchild, o or a person with whole the victim is or was in a relationship is in loco parentis. Definition of spouse : This definition is amended to refer to the definition of spouse under OFLA (see above). For a copy of the temporary changes, please paste the following into your browser. %202014%20Step%20Parent.pdf 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.**