Legislative Updates Corinne Tirone, JD, Manager, Employment Law Research
Welcome Corinne Tirone, JD: 10+ years working in legal research, 5+ years in the payroll and human capital management industry Leads a team of talented and passionate compliance professionals dedicated to delivering best-in-class HCM products Member of: IRS Reporting Agent Forum: A committee comprised of the lead Tax Professionals from all the major Payroll Providers, including IRS Agents and Legal Counsel National Payroll Reporting Consortium: A group dedicated to working with Tax Agencies on behalf of our customers. 2
Agenda Social Security and Medicare Tax Updates USDOL FLSA Overtime Exemption Changes Identity Theft in Tax Administration Accelerated Filing for W2 s Federal Unemployment Tax Updates State Unemployment Paid Sick Leave State Retirement Plans ACA Q&A 3
Social Security and Medicare Tax 2017 Updates 4
Social Security Social Security Wage Base: 6.2% for both employer and employee, 12.4% total. Wage base increased from $118,500 in 2016 to $127,200 in 2017. This equates to a maximum Employee Withholding of $7,886.40 Maximum Employer Liability of $7,886.40 per employee The 2018 Wage Base will increase to $128,700 Maximum contributions will be $7,979.40 for employees and $7,979.40 for employers 5
Medicare Tax Reminder: No Limit to amount of wages subject to Medicare tax 1.45% for both employer and employee, 2.9% total. This will remain the same for 2018. Effective since 2013: Additional Medicare Tax of 0.9% for earnings in excess of $200,000.00 Amount of additional tax will be included in Box 6 of form W2 Employees with high earnings will report amounts on form 1040 Single Taxpayers with Medicare Wages over $200,000.00 Married Taxpayers with Medicare Wages over $250,000.00 6
Overtime Pay and FLSA 2017 Updates 7
Overtime Pay and FLSA White Collar Exemption last updated in 2004 May 18, 2016: President Obama announced the publication of the Department of Labor s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. 8
Overtime Pay and FLSA Key Provisions of the Final Rule: The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule: Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker); Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and Establishes a mechanism for automatically updating the salary and compensation levels every three years, to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption. https://www.dol.gov/whd/overtime/final2016/index.htm 9
Overtime Rule Timeline The effective date of the final rule was set for December 1, 2016. Injunction granted in November 2016 DOL issued a Request for Information Summary judgment is granted 10
Overtime Rule Next Steps DOL is appealing summary judgment and requesting a stay of proceedings pending rule making Next overtime rule likely to come in next several months 11
Identity Theft in Tax Administration 2017 Updates 12
How does it happen? Identity thieves only need a name, social security number, and DOB to file a fraudulent tax return. Identity thieves typically file early in the tax season. They request the refund be issued on a pre-paid credit card. 13
What is IRS doing to combat fraud? Security Summit Initiative Taxes. Security. Together. Campaign Refunds being delayed under PATH Act Results: 30% drop in confirmed identity theft returns between 2016 and 2017, and 40% drop in number of taxpayers who have reported themselves as victims of identity theft. 14
Next Steps: Form W-2 Verification Code To verify Form W-2 data submitted by taxpayers on e-filed individual tax returns. The IRS has partnered with Payroll Service Providers (PSPs) to include a 16-digit code and a new Verification Code field on a limited number of Form W-2 copies provided to employees. Example: XXXX-XXXX-XXXX-XXXX. 15
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How can you protect your business and your employees? Use Security Software Avoid Phishing Emails Be Wise about Wi-Fi Lock up your Computer or Laptop Read Privacy Policies Educate your workforce Source: www.consumer.ftc.gov (Federal Trade Commission) 17
State W-2 Filing Deadlines 2017 Updates 18
State W-2 Filing Deadlines States also Work to Battle Tax Fraud Resulting from Identity Theft States are moving towards early W-2 Filing Deadlines to combat the problem: 38 States now Require employer copies of forms W2 filed with the same deadline used for mailing Employee Copies Several states have legislation pending to move filing deadlines forward to January 31 st. What does this mean for you? 19
States with W-2 Filing Deadline of 1/31 Alabama Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Delaware Georgia Idaho Iowa Illinois Indiana Kansas Kentucky Louisiana Maine Massachusetts Maryland Minnesota Missouri Mississippi Montana Nebraska New York North Carolina North Dakota Ohio Oregon Pennsylvania Rhode Island South Carolina Utah Virginia Vermont West Virginia Wisconsin Puerto Rico Virgin Islands Note: Make sure to review the your 2017 payroll data early and be prepared to close your books the first week of January. 20
The Year End Dashboard Can Help Generate W2 previews on demand to confirm changes Review important information related to year end Access year end delivery tracking information 21
Retirement Plan Limits 2017 Updates 22
IRS 2018 RETIREMENT PLANS AND HSA/FSA CONTRIBUTION LIMITS Retirement Plans 2016 2017 2018 Traditional Roth IRA Below Age 50 $5,500 $5,500 $5,500 Catch-up Contribution Age 50+ $1,000 $1,000 $1,000 Maximum Employee Contribution $12,500 $12,500 $12,500 Catch-up Contribution Age 50+ $3,000 $3,000 $3,000 Simple IRA Maximum Employer Elective Deferral Match: dollarfor-dollar up to 3% of the employee's $12,500 $12,500 $12,500 compensation Maximum Employer Non-Elective Contribution: 2% $5,300 $5,400 $5,500 SEP IRA 401(k), 403(b) and 457(b) Profit Sharing and 401(k) of each eligible employee's compensation Maxium Employer Contribution $53,000 $54,000 $55,000 SEP Minimum Compensation Limit $600 $600 $600 Maximum Employee Contribution $18,000 $18,000 $18,500 Catch-up Contribution Age 50+ $6,000 $6,000 $6,000 Highly Compensated Employee Compensation $120,000 $120,000 $120,000 Defined Contribution Limit (Annual Additions) $53,000 $54,000 $55,000 Top-heavy Plan Key Employee Compensation $170,000 $175,000 $175,000 Profit Sharing, 401(k) and SEP Annual Compensation Limit $265,000 $270,000 $275,000 Defined Benefit Plans Annual Benefit Limit $210,000 $215,000 $220,000 Health Savings Account (HSA) Maximum Contribution Limit High-Deductible Health Plan Minimum Deductible High-Deductible Health Plan Maximum Out-of-Pocket Amounts Individual $3,350 $3,400 $3,450 Family $6,750 $6,750 $6,900 Catch-up (age 55+) $1,000 $1,000 $1,000 Individual $1,300 $1,300 $1,350 Family $2,600 $2,600 $2,700 Individual $6,550 $6,550 $6,650 Family $13,100 $13,100 $13,300 23
What s New in FUTA 2017 Updates 24
FUTA Basics Updates: For 2017, the FUTA tax rate is 6.0%: The tax applies to the first $7,000 you paid to each employee as wages during the year Generally, you can take a credit against your FUTA tax for amounts you paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. The FUTA tax rate after credit is 0.6%. California the Virgin Islands are at risk for a reduction in the credit due to outstanding Federal Trust Fund Loans 25
Benefit Cost Rate Add-On Imposed beginning with the fifth tax year of any succeeding January 1 st that there is a balance on the federal UI loan Calculation compares average unemployment benefits paid to tax effort in state Source: https://oui.doleta.gov/unemploy/docs/potential_credit_states_2017.xlsx 26
FUTA Next Steps What to Expect: Employers will be notified of the potential additional Credit Reduction liability as soon as the US Department of Labor releases the final list of impacted States after November 10. Paylocity can assist by generating reports to estimate the additional liability so Employers can accrue for the additional tax due Paylocity will collect the additional tax due in January along with Quarter 4 Variance Collections 27
State Unemployment Tax 2017 Updates 28
SUI Rate Notices Impact on Tax Filing: Incorrect SUI rates will lead to Tax Notices and Quarter End Variance Collections: If your rate is added after your first payroll run, then the impounded SUI Tax will be incorrect This variance is collected Mid-April and detailed in your Quarterly Tax Return Package If your rate is incorrect on the last payroll of the quarter, your return and tax will be incorrect and result a Tax Notice of over or under payment. Amounts due will carry Penalty and interest and may result in an increased UI rate iin certain states. Credits may result in refunds or the next quarter to apply any credit to future liability: Early Rates make for accurate returns More Accurate Payroll Cost Accounting and budget forecasting Send your Unemployment Rates as soon as possible to SUIRates@paylocity.com 29
Paid Sick Leave
Paid Sick Leave is a growing trend Currently 40 counties, cities, or states have passed paid sick leave laws. The following leave laws went into effect in 2017 or will go into effect next year: January 2017 July 2017 October 2017 Spokane, WA Arizona Berkeley, CA Santa Monica, CA Chicago, IL January 2018 Vermont Cook County, IL Washington Minneapolis, MN July 2018 Saint Paul, MN Rhode Island 31
Pending Leave Legislation Maine Maryland Michigan Minnesota North Carolina Pennsylvania 32
Best Practices for a new PSL 1. Identify who in your employee population is affected 2. Determine which method you choose to use, frontloading or accrual base 3. Determine if current PTO policies cover or do not cover paid sick leave 4. Determine the calendar year you would will using to enforce the paid sick leave 5. Educate employees on the paid sick leave law 6. Ensure notice and recordkeeping requirements are followed 7. Review attendance and other disciplinary policies to ensure that adverse actions are not taken when an employee uses paid sick leave 8. Educate managers on handling paid sick leave requests 9. Stay informed on new PSL ordinances at the local level some employers may need to ensure compliance with both state and local requirements 33
State Retirement Plans
Eight states with retirement plans California Connecticut Illinois Maryland Massachusetts New Jersey Oregon Washington 35
What s new with ACA?
ACA is still the law of the land Employers are still required to offer affordable coverage and must report on that offer You must review and complete your 1095s Furnish to employees and file timely IRS plans to issue first penalties in December IRS intends to enforce reporting requirements for both employers and employees with 2017 reporting 37
Important Dates Have complete data in the system: December 29 th, 2017 Furnish 1095-C to employees: January 31 st, 2018 File 1094-C and 1095-C February 28 th, 2018 by paper April 2 nd, 2018 electronically 38
Executive Order Signed October 12 th, Promoting Healthcare Choice and Competition Across the United States. Directs Treasury, Labor, and Health and Human Services to consider proposing changes in regulations or revising guidance, consistent with law, to implement changes in these areas: Association Health Plans Short-term, limited-duration insurance Health reimbursement arrangements (HRAs) 39
Other Items Tax Reform Mobile Workforce FAMILY Act 40
Closing Reminders Review Year End Guide Review changes to FICA and Retirement Limits and communicate changes to your employees Communicate FUTA Credit Reduction Expense to your accounting department so they can accrue the expense and fund the collection Send any Rates, State Account Numbers (EINs) and Payment Frequencies provided by Tax Agencies to Paylocity at SUIRates@paylocity.com Work with your Insurance Broker and Paylocity to ensure all Health Care benefits costs are properly reported on form W2 for 2017 Work with your Paylocity Account Manager to ensure you are gathering and entering the data required for 1094-C & 1095-C forms Review your Taxes Tab and W-2/1095-C Previews before forms are printed Do not hesitate to call on us for any reason we are here to help! 41
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Additional Resources https://www.irs.gov/ https://www.irs.gov/newsroom For info on 401k limits, disaster relief, and security initiatives https://docs.paylocity.com/ https://www.paylocity.com/resources/news To access the glossary in WebPay https://access.paylocity.com/> Home > Glossary 44