Pay Matters! August 2019
Welcome to Pay Matters, our monthly roundup of all the payroll and compliance news that you must know.
Stay informed and in compliance with our monthly payroll alerts and insights.
ACA’s Cadillac Tax on Brink of Repeal
On July 17, the U.S. House of Representatives voted to repeal the repeatedly delayed, so-called Cadillac tax.
This tax was created with the intention to help finance the expansion of health coverage under the Affordable Care Act and was scheduled to take effect in 2022 after being delayed twice by Congress. Employers offering high-cost health plans would have been subject to an excise tax of 40% of the cost of the insurance beyond designated thresholds.
The vote to repeal passed almost unanimously (419 to 6). Now the bill will go to the Senate. If passed and signed by the President, many employers will be relieved of a potentially high tax burden.
Opponents of the repeal say it would result in the loss of millions of revenue dollars needed to fund the current health insurance system.
For more information on the Cadillac tax click here.
IRS Releases Shocking ACA Statistics
The IRS announced that an alarming 72% of large employers did not file their 2017 Forms 1095-C for the year 2017 in a compliant way: 25% of large employers did not file at all, while about 45% failed to correctly file. The IRS has started sending out noncompliance letters to employers and penalties may be severe.
Utilizing an ACA compliance product is key to avoiding IRS penalties. Contact your Client Services Team to find out about Viventium’s ACA tools.
New Overtime Rule May be Finalized for 2020 under New DOL Leadership
New Acting Labor Secretary Patrick Pizzella may be the catalyst for turning the Department of Labor’s (DOL) proposed overtime rule into reality.
Under the March 7 DOL proposal, the weekly salary threshold, above which qualifying employees may be classified as exempt from overtime pay, will rise to $679, or $35,308 per year. This is a significant increase from the current $455 per week and $23,660 annual threshold.
The DOL proposal also allows employers to count nondiscretionary bonuses and incentive payments, such as commissions, toward up to 10% of the salary test. In addition, the new salary threshold for Highly Compensated Employees (HCEs) will rise from $100,000 to $147,414 per year. The duties tests for executive, administrative and professional exemptions will remain unchanged, and there will be no automatic increases to the salary threshold, although the rule recommends adjusting the thresholds once every 4 years, pursuant to a notice and comment period.
Under Pizzella’s leadership, the overtime proposal may be finalized for 2020. Viventium will continue to monitor developments and keep you updated.
For more information on the DOL overtime proposal click here.
Upcoming Changes to the W-2 Electronic Filing Threshold
More employers will be required to electronically file Forms W-2 in the coming years.
On July 1, President Trump signed a bill reducing the W-2 electronic filing threshold from 250 to 100 for 2021 W-2s (filed in 2022), and to just 10 for 2022 W-2s (filed in 2023).
Viventium tax service clients are automatically in compliance with this new provision. If you are not on tax service, follow Viventium’s year-end communications and enroll in W-2 filing service to ensure compliance.
For a copy of the bill click here.
House Passes $15 Minimum Wage Bill
The U.S. House of Representative passed a bill to increase federal minimum wage to $15 per hour by 2025. The bill is unlikely to be considered by the Senate for approval. The federal minimum wage has been $7.25 per hour since July 2009.
EEOC Portal is Live
On July 15, collection of 2017 and 2018 EE0-1 Component 2 employee data began with the opening of an online portal.
Employers with 100 or more employees must report Component 2 date for each quarter of 2017 and 2018 by September 30, 2019. Employers must submit employee data organized into the usual categories of race/ethnicity, gender, and one of 10 job categories. That data must then be sorted into 12 pay bands, with annual hours reported, to create a grid representation of a workplace’s diversity.
The EEOC has created a website with resources including a sample form, FAQs and a User’s Guide to help employers meet their reporting requirements.
Viventium’s BI (business intelligence) product can help you meet your EEOC requirements. Contact your Client Services Team for assistance in building your reports.
Connecticut Passes Generous Paid Family Leave Law
On June 25, Connecticut Governor Ned Lamont signed legislation to enact Connecticut’s paid family leave law, one of the most generous in the country.
Under the law, eligible employees will be entitled to up to 12 weeks of paid leave:
- to care for a new child (birth, adopted, foster);
- to care for a family member with a serious health condition;
- to care for his/her own serious health condition;
- for a qualifying exigency arising out of family member being on active duty; or
- to serve as an organ or bone marrow donor.
Benefits for eligible employees will start January 1, 2022 and will be paid at 95 percent of their base weekly wage up to 40 times the minimum wage and 60 percent of earnings above the minimum wage. In addition, the maximum weekly benefit cannot exceed 60 times the minimum fair wage. Beginning January 1, 2021, benefits will be funded by employees through a payroll withholding of 0.5% of wages capped at the Social Security wage base. All private-sector employers with one or more employees are covered by the law.
Connecticut joins a growing number of states enacting paid family and medical leave laws, a trend that will likely continue in the coming months and years.
For a copy of the legislation click here.
Washington Delays PFML Reporting Deadline
Washington has granted employers extra time to report and pay their first and second quarter Paid Family and Medical Leave contributions.
On July 2, The WA Employment Security Department announced that the deadline to submit contributions and reports was moved from July 31 to August 31. The program’s electronic payment and filing portal can be accessed at SecureAccess Washington. Employers must create an account to file and pay for both quarters by the deadline.
More information including a reporting checklist and FAQ can be found at the paid family- and medical-leave program’s website.
California Expands Paid Family Leave Benefits
Effective July 1, 2020, eligible employees in California can take 8 weeks of paid family leave to care for an ill family member or after the birth, adoption, or fostering of a child. Currently, the law grants 6 weeks of paid leave.
For a copy of the bill click here.
Massachusetts PFML Law Updates
On June 18, Massachusetts released final Paid Family and Medical Leave (PFML) regulations clarifying that:
- Contribution start date is delayed until October 1, 2019. The contribution rate changed to 0.75%
- Covered earnings do not include earnings of 1099-MISC contractors unless the contract worker elects coverage under the PFML program or more then 50% of the employer’s workforce is comprised of 1099-MISC workers.
- Employers may deduct different percentages (not to exceed 0.75%) from designated groups of workers (e.g. exempt vs. non-exempt).
Covered employees must be provided with a PFML notice by September 30, 2019 either on paper or electronically. The notice must reflect the contribution rate and the date collections will commence. Updated notice templates can be found here.
If notices were already provided before the announcement of the delay on June 14, a rate update sheet, also available on the site, must be provided by September 30.
New York Expands Pay Equity Law
On July 10, New York Governor Andrew Cuomo signed legislation expanding worker protections under the New York Pay Equity Law.
Effective October 8, 2019, the expanded law requires equal pay among employees who perform “substantially similar” work, not just “equal work.” This distinction will require employers to look beyond job titles to the job roles and classes of jobs. The law also expands the protected groups beyond gender to include age, race, creed, color, gender identity or expression, military status, disability, genetic characteristics, familial status, marital status, domestic violence victim status, or other status protected by law.
Effective January 6, 2020 the law bans salary history questions to current employees and applicants. In addition, employers cannot use salary history to determine an employee’s pay rate.
Expanded Rights for New York’s Farm Workers
Effective January 1, 2020, New York farm workers must be paid overtime for hours worked over 60 in a week. In addition, farm workers are entitled to a 24-hour period of rest each week. Workers may choose to forego the day of rest but must be paid overtime at time and a half for those hours.
Under the law, paid leave and disability leave benefits must be provided, collective bargaining rights are granted, and farm workers are covered under unemployment insurance law.
California Local Minimum Wage Increase
In addition to the California local minimum wage increase reported in the July issue of Pay Matters (insert link to last month), Berkeley, California increased its minimum wage from $15.00 to $15.59 per hour effective July 1, 2019.
For more information see https://www.cityofberkeley.info/MWO/.
Similarly, the city of Sonoma, CA announced the following increases:
|Date||Large Employers (26 or more employees)||Small Employers (25 or fewer employees)|
Note that special provisions apply to employees between 14 and 17 and to employers offering medical benefits.
Disclaimer: Viventium will never automatically increase pay rates; It is always the employer’s responsibility to ensure compliance with minimum wage requirements.