Tech Flex. November 2010, Issue XI. Topics Covered in this Issue: Benefits: Payroll: Leave:

Transcription

1 November 2010, Issue XI Tech Flex Topics Covered in this Issue: Benefits: 2011 Pension Contribution Limits Released Further Health Care Reform Guidance Released California Amends Insurance Code Payroll: Puerto Rico Tax Holiday for December 2010 Various Minimum Wage Increases Leave: Minnesota Amends Voting Leave Law California Extends Organ and Bone Marrow Leave Law

2 2011 PENSION CONTRIBUTION LIMITS RELEASED On October 28, 2010, the Internal Revenue Service announced cost of living adjustments applicable to dollar limitations for pension plans and other items for Tax Year These limits remain unchanged from Per the IRS Release: Revenue Procedure provides the cost-of-living adjustments to certain items for 2011 as required under the Internal Revenue Code. This revenue procedure does not include the following items: the tax rate tables under section 1, the child tax credit under section 24, the Hope Scholarship and Lifetime Learning Credits under section 25A, the earned income credit under section 32, the standard deduction under section 63, the overall limitation on itemized deductions under section 68, the qualified transportation fringe under section 132, the personal exemption under section 151, and the interest on education loans under section 221. Those items will be addressed in future guidance. The limits for 2011 as compared to 2010 limits are as follows: Plan Maximum Contribution Limits Section 401(k) Plan or SAR-SEP $16,500 $16,500 Section 403(b) Plan $16,500 $16,500 Section 408(p)(2)(A) SIMPLE Plan Contributions $11,500 $11,500 Section 457(e)(15) Limit $16,500 $16,500 Section 415 Limit for: Defined Contribution Plans Defined Benefit Plans $49,000 $195,000 $49,000 $195,000 Highly Compensated Employees: Section 414(q) $110,000 $110,000 2

3 Key Employee Section 416(i)(1)(A)(i) $160,000 $160,000 Control Employee Compensation: Section (f)(5)(i) fringe benefit $95,000 $95,000 Section (f)(5)(iii) $195,000 $195,000 Includible Compensation Sec. 401(a)(17) $245,000 $245,000 SEP Compensation $245,000 $245,000 SEP Earnings Threshold $550 $550 Limited Governmental Plans (pre 7/1/93) $360,000 $360,000 Employee Stock Ownership Plan - Sec. 409 Max. to lengthen 5-year distribution $985,000 $195,000 $985,000 $195,000 The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500. For a copy of Revenue Procedure please click on the link provided below. 3

4 FURTHER HEALTH CARE REFORM GUIDANCE RELEASED As reported in past issues of the Tech Flex, as result of the enactment of the Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act a number of health care reform provisions are effective for plan years beginning on or after September 23, 2010 as well as for plan years occurring through January 1, For an overview of the health care reform provisions, please see the April 2010 Tech Flex. On November 1, 2010 the Department of Labor (DOL), Health and Human Service (HHS) and the Internal Revenue Service (IRS) jointly released an additional three frequently asked questions (FAQ). This new guidance, as summarized below, contains two questions regarding grandfathered plans and one question regarding expense reimbursement of learning-disabled children with physical, mental, or developmental disabilities. FAQ 1: Grandfather Status Notice. Under health care reform, a requirement of any plan that wishes to claim grandfather status is that the plan must notify its participants of such plan status. It was clarified that a plan is not required to provide a grandfather status notice with each and every communication provided to plan participants and beneficiaries such as an explanation of benefits. The notice of grandfathered status requirements would be met if the plan provides a notice whenever a summary of the benefits under the plan is provided. Examples provided included summary plan descriptions provided at initial enrollment and open enrollment materials. FAQ 2: Ability to Elect Cost-Sharing Increase. The second question relates to individual health insurance in relation to an individual policy in place on March 23, 2010 which allowed a policy holder to elect an option to pay a reduced premium in exchange for higher cost-sharing. The guidance clarified that if the policy holder exercises such 4

5 an option (even after March 23, 2010) that the grandfathered status of the plan would not be impacted even if the increase in cost-sharing for a particular individual would exceed the amounts allowed under the grandfather rule. FAQ 3: Essential Health Benefits Lifetime Limit. The last question deals with plans maintained before the enactment of health reform legislation that reimburse expenses outside of the employer s primary medical plan for special treatment and therapy of learning-disabled children including day and residential special care facilities. It was clarified that until final regulations are issued, it will be considered as reasonable good interpretation that the imposition of per-child lifetime dollar limit on benefits provided would not violate the lifetime limit prohibition as mandated under health care reform. For a copy of the frequently asked questions, please click on the link below. CALIFORNIA AMENDS INSURANCE CODE The state of California has amended its insurance laws via Assembly Bill 1178 to conform to the federal health mandate requiring plans that cover dependents must provide coverage to employee s children to age 26. However, the California law in relation to the age 26 mandate did differ from federal law in two significant ways. Under California law, stand-alone dental, vision and insured retiree-only plans are not exempt from the age 26 requirement. Consequently, insured dental, vision and retireeonly plans in California must provide coverage to dependents to age 26. Under federal law, covered dependents other than an employee s biological, adopted, step or eligible foster children, such as a grandchild, may be required to meet additional eligibility requirements such as student status or tax dependency in order to be eligible 5

6 for coverage. However, under California law, an insured plan may not require additional requirements for any child. It is important to note that the revised California law did not extend state tax relief on premiums paid for group health plan coverage provided to adult dependents between age 24 and 26. Consequently, the cost of employer provided coverage paid by an employer for a child between age 24 and 26 will be taxable for California state income tax purposes, but not taxable for federal income tax purposes. For a copy of Assembly Bill 1178, please click on the link provided below. PUERTO RICO TAX HOLIDAY FOR DECEMBER 2010 The Puerto Rico Department of Treasury has issued Administrative Determination Number 10-09, which provides for a tax holiday for the month of December The Administrative Determination states in part the following: Since there is very little time to modify the withholding tables, as a result of the Governor s proposed Tax Reform Plan, presently all employers and withholding agents are exempt from the obligation of withholding tax on salaries paid for daily, weekly, biweekly, semimonthly and monthly pay periods that correspond to the month of December of Tax Year Additionally, employers are exempt from the obligation of withholding the tax on the Christmas Bonus that corresponds to Tax Year

7 Any payments that are not considered salary or Christmas Bonus are still subject to withholding. These salaries continue to be subject to any other deductions authorized by law, such as Social Security and Medicare tax and any other voluntary deductions incurred by the employee. A link to Administrative Determination is provided below. VARIOUS MINIMUM WAGE INCREASES The states of Arizona, Vermont and Washington and the city/county of San Francisco have announced an increase to its minimum wage to be effective in Arizona: Effective January 1, 2011, the Arizona minimum wage will be changing from $7.25 per hour to $7.35 per hour. The tipped employee minimum hourly rate will be changing from $4.25 per hour to $4.35 per hour in direct (cash) wages. Therefore, the maximum tip credit will be remaining at $3.00 per hour. ($ $3.00 = $7.35). Vermont: Effective January 1, 2011, the Vermont minimum wage will be changing from $8.06 per hour to $8.15 per hour. 7

8 The tipped employee minimum hourly rate will be changing from $3.91 per hour to $3.95 per hour in direct (cash) wages. Therefore, the maximum tip credit will be changing from $4.15 per hour to $4.20 per hour. ($ $4.20 = $8.15). Washington: The Washington minimum wage will be changing from $8.55 per hour to $8.67 per hour effective January 1, No tipped employee minimum hourly rate. Tipped employees must be paid direct (cash) wage of $8.67 per hour as Washington does not recognize the tip credit. As of January 1, 2011, the training/youth wage rate will be changing from $ (85%) per hour to $ (85%) per hour. San Francisco: Under the authority reserved to local governments by the California Constitution and California Labor Code section 1205(b), San Francisco adopted its own minimum wage effective February Effective as of January 1, 2011, all employers shall pay a minimum wage of $9.92 per hour for work performed by adult and minor employees who work two or more hours per week within the geographic boundaries of the city. MINNESOTA AMENDS VOTING LEAVE LAW The state of Minnesota has amended a provision of its voting leave law (Minnesota Statute 204C.04) to delete the phrase for the purpose of voting during the morning of and replace it with the phrase for the time necessary to appear at the employee s polling place, cast a ballot, and return to work on 8

9 Minnesota Statute 204C.04 Subdivision 1 now reads: Every employee who is eligible to vote in an election has the right to be absent from work for the time necessary to appear at the employee's polling place, cast a ballot, and return to work on the day of that election, without penalty or deduction from salary or wages because of the absence. An employer or other person may not directly or indirectly refuse, abridge, or interfere with this right or any other election right of an employee. CALIFORNIA EXTENDS ORGAN AND BONE MARROW LEAVE LAW With the signing of the Michelle Maykin Memorial Donation Protection Act (SB 1304), California has extended the right to take leave from work to donate organs or bone marrow to employees of private employers. Under current California law, employees of the state who have exhausted all available sick leave must be permitted to take a leave of absence from work with pay, not to exceed 30 days for the purpose of organ donation and not exceeding five days for bone marrow donation. Effective January 1, 2011, private employers are required to permit their employees to take similar paid leaves of absence for organ and bone marrow donation. The revised law requires that a private employer must restore an employee returning from leave for organ or bone marrow donation to the same position held by the employee when the leave began or an equivalent position. In addition, the law will prohibit a private employer from interfering with an employee taking organ or bone marrow donation leave and from retaliating against an employee for taking that leave or opposing an unlawful employment practice related to organ or bone marrow donation leave. Finally, 9

10 the law creates a private right of action for an aggrieved employee to seek enforcement of these provisions. For a copy of California SB 1304, click on the following: Please contact ADP National Account Services for further information at: th Drive SE Suite 200 Bothell, 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.** 10