What Employers and Human Resources Should Know About The Fiscal Cliff

As an HR Professional or employer, you may be watching the news and wondering how the "Fiscal Cliff" may affect your business. The term "fiscal cliff" describes a package of significant U.S. federal tax increases and spending cuts that are due to take effect in late 2012/early 2013. These measures are designed to reduce the federal budget deficit by $503 billion by the end of FY13. Although reducing the deficit is a high priority, the timing for these measures could not be worse. In the midst of a still uncertain economic recovery, many economists and political pundits believe that such significant tax hikes and budget cuts could cause a double-dip recession and a spike in unemployment in 2013.

The budget cuts are focused on the Defense Department as well as "discretionary" programs, which means that there could be cuts in U.S. infrastructure, schools, public health and homeland security programs. Social Security, Medicaid, supplemental security income, refundable tax credits, the children's health insurance program, the food stamp program and veterans' benefits are exempt from the planned budget cuts. In combination with impending tax increases, including the new Obamacare health care taxes, U.S. businesses could be on the precipice of an economic disaster.

Small businesses would be among the hardest hit, and according to a new survey by Wells Fargo and Gallup, small business owners are preparing for the worst. In fact, more than 20% of small business owners said they planned to reduce the size of their work force over the next 12 months. In addition to possible layoffs, many questions are waiting to be answered regarding employee benefits and taxes.

While Washington grapples with a plan to prevent the U.S. from going over the fiscal cliff, employers, HR and benefits professionals can prepare now for several potential changes in 2013.

Expiration of the payroll tax cuts

On December 31, 2012, the Bush-era tax cuts are set to expire, which will bring the tax system back to 2001 levels. At the same time, President Obama's temporary 2% payroll tax cut will expire, which lowered employees’ Social Security payroll taxes. If these tax cuts expire as planned, the average U.S. family of four earning $50,000 will see taxes increase by $1,040 a year. Although the increase is on employee contributions, it also affects an employer’s withholding obligations.

Similarly, a new 0.9% Medicare payroll tax increase applies (from 1.45% to 2.35%) under the Patient Protection and Affordable Care Act (PPACA) on wages over $250,000 for married taxpayers filing jointly and $200,000 for single taxpayers. Like the 2% payroll tax increase, the Medicare payroll tax increase is not an employer liability, but employers must be prepared to withhold the additional 0.9% from wages for any employee with wages over $200,000.

Adoption assistance

Another Bush tax cut set to expire at the end of 2012 is a one-time adoption tax credit that gave $12,650 in 2012 for expenses related to the adoption or attempted adoption of a child. Qualified adoption expenses include reasonable and necessary adoption fees, including court costs, attorney fees, traveling expenses and other direct adoption-related expenses. Unless Congress acts to extend this tax credit, beginning on Jan. 1, 2013, only parents who adopt special needs children from within the United States will be eligible for a $6,000 tax credit.

Flexible spending account contributions

Under the health care reform bill, flexible spending account (FSA) levels will be reduced to $2,500 per year for plan years beginning in 2013. At the same time, the threshold for claiming medical deductions will be increased from 7.5% to 10%. This new limit must be documented in a flexible benefits plan by Dec. 31, 2014, regardless of the fiscal year of the flexible benefits plan, and this change must be retroactive to the beginning of the 2013 plan year.

Educational assistance

The IRS allows an employer to reimburse an employee on a tax-free basis up to $5,250 for certain educational expenses. However, this $5,250 tax-free employer-provided educational benefit expires after 2012. Employers should note that they can still provide some type of educational reimbursements in a more limited basis if they qualify as a business expense and meet certain requirements.

While small business owners are left dangling over the edge of the abyss, Washington is working to intervene and could. In the meantime, employers should consider communicating with employees about the ambiguity surrounding potential benefit changes for 2013 and the possibility of a 2% payroll tax increase. 

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

NLRB Required Job Posting 1/1/31 for Employers

New Posting Requirement for Employers

Employers: Are you prepared?  There is a new posting requirement by the National Labor Relations Board.  This new rule affects all employers, regardless of union or non-union. 

By January 31, 2012, employers are now required to post a new notice about employee rights under the National Labor Relations Act. 

As with other labor and employment law posters,  the information must be posted in a conspicuous location. For information about size and content, and to download a template free of charge you can visit the NLRB website.

A number of organizations are challenging the rule, however at this point such challenges have only postponed, but not have not eliminated, the poster requirement. We will notify HR Knowledge, Inc. clients if there is a change; until such time all affected employers should comply no later than January 31 of next year.

The poster is available for download at http://www.nlrb.gov/poster and HR Knowledge will be providing all full-service clients with one at no charge. 

For more information about this posting requirement, to keep updated on other laws and regulations that can effect an employer, and tips to stay in compliance, please contact us.

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Company Fraud are there signs?

Can You Spot Someone Committing Fraud at Your Company?

Believe it or not, someone committing corporate fraud, or "cooking the books" is not that difficult to spot, once you know what to look for.  According to the study "Who is a Typical Fraudster?" developed and based on analysis of corporate fraud by KPMG International’s member firms, "fraudsters"  typically meet the following critera:

• 36-45 year old male in finance related role
• 10+ years longevity with the company
• Rarely takes vacations
• May only want to work with certain vendors
• Stressed-out most of the time

Also, their behavior is suspect:

• They cut corners
• They may have poor performance or make mistakes
• They tend to hire "Yes men" who will go along with whatever they say or do
• They seem to live well beyond their means
• They may exhibit signs of alcohol or substance abuse

Although this information is designed to give you an overview of someone most likely to commit fraud, it's imperative that you refrain from profiling.   HR execs must take measures to protect not only the company, but the employee.

During the hiring process please make sure you perform a background check on the people you hire, often times there can be a history in their past that might demonstrate some or all of the following:

• Criminal activity in the past
• Financial trouble for late payments to vendors
• Bankruptcy
• Employer Lawsuits for Workers' Compensation or an Employment Practice Lawsuit for Wrongful Termination

Checks and Balances in the workplace are vital to assist in prevention of fraud.  Always have a different person reviewing and balancing the checking accounts and monitor all cash and check writing capabilities.

For more comprehensive guidance on all things HR, contact HR Knowledge, Inc. at Sales@hrknowledge.com or call at 508-339-1300.

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Hiring Employees with I-9 Compliance

Our most recent hire worked for almost a full week before it was discovered that she failed to meet I-9 eligibility criteria.  How are we supposed to pay her?

It is a challenge to pay someone for work performed when there is no proper documentation, but she must be paid, period.

The Department of Labor’s (DOL) states “work not requested but suffered or permitted to be performed is work time that must be paid for by the employer…The reason is immaterial. The hours are work time and are compensable.”

And, regardless of her I-9 status, the Internal Revenue Service (IRS) expects you to withhold payroll taxes.

There's really only one way to avoid this type of situation and that is by planning carefully.  Here are some tips to follow in order to ensure there is no violation of the Fair Labor Standards Act or IRS rules:

• Pay the employee to ensure you fulfill the requirements of DOL and IRS.  You may pay the wages owed the employee in cash or by check (via the company's payroll system) minus the amount deducted for taxes.
• When hiring, be sure to require work authorization PRIOR to the commencement of work
• Obtain and complete ALL paperwork on new employees BEFORE any work is performed, which of course includes the I-9.  And, be sure Payroll has a copy of the employee's Social Security card on file

For more comprehensive guidance, contact HR Knowledge, Inc. at Sales@hrknowledge.com or call at 508-339-1300.

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Health, Disability, Life, Dental, Vision Insurance: paying too much?

Do you know if you are overpaying for your company sponsored Health, Dental, Life & Disability plans?

One question we frequently hear from potential clients is - "Is there is any way to tell if our sponsored group benefit plan rates are set correctly by the insurance companies?"  The answer is "yes".  And, there's also a way to find out how much profit your insurance company yields from your company premiums.

At HR Knowledge, we consistently reduce premiums of group benefit plans through our proprietary algorithm which can accurately determine the profitability of your group plans with the carriers.

Here are a couple of examples of companies we have helped:

A major health insurance company assessed that for the $3 million that Company A received in premiums, the insurance company had paid out $3.3 million in claims and associated expenses. The health insurer was requiring an annual

premium increase of $385,000. After running the plan financial data through our proprietary algorithm, we were able to leverage the results to secure a reduction off Company A’s renewal of $400,000, which actually resulted in a rate reduction for the client.

A major health insurance company received $1.9 million in premium and paid $2.275 million in claims, a loss of $375,000. They were requiring an increase from Company B of $271,000.  After running the group’s plan data through our proprietary algorithm, we discovered that the losses were not as high as the insurance company had represented.  The renewal increase was subsequently reduced to $100,000.

How we can help your company?

• We can review your benefit costs, provide a detailed analysis utilizing the proprietary algorithm to accurately determine the profitability of your group plans with the carriers.  Then we'll determine more equitable pricing of these benefits. 

• This analysis helps HR Knowledge negotiate your benefit group plan rates with compelling indisputable data, that the carrier underwriters clearly understand and adopt to ensure more AFFORDABLE pricing on your benefits

We impact 80% of the companies we analyze, yielding substantial savings on benefit plans.  To receive a no obligation quote or “second opinion” on your group benefit plans, contact HR Knowledge at 508-339-1300

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Employee/Employer Benefits Costs are too High!

Trends in Employee Benefits -

More and more business are moving to medical plans with deductibles. Medical plans with deductibles generally provide lower premiums for the employer and employee.  The challenge faced with a deductible plan is that employees have to burden a greater portion of the insurance costs.  There are ways to help manage this by utilizing an outsourced HR Service provider like HR Knowledge, Inc.

A recent trend to help curtail the rising costs of health insurance is to increase the deductible, but to also implement a Health Reimbursement Arrangement (HRA). By doing so, the premiums are further reduced due to the higher deductibles, but the company “self insures” a portion of the deductible through a HRA. The HRA protects the employee as the company shares in the deductible expense. We are seeing premiums decrease by 10-20% when this strategy is implemented. After paying its portion of the HRA, a company will likely see savings of 5-10% while maintaining strong benefits.

As a licensed broker providing "Best in Class" benefits, HR Knowledge, Inc. can help your company contain costs, minimize risk, and relieve the HR administrative burden. For more comprehensive guidance on a HRA, contact HR Knowledge, Inc.at Sales@hrknowledge.com or call at 508-339-1300.

 

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Defined Benefit Pension Plans Are They Still Viable?

Defined Benefit Pension Plans Making a Comeback

 

Remember your father's pension plan?  Before the days of restrictive government regulation, many companies offered one basic variety of pension plans—the defined benefit plan.  With these plans, employers were responsible for pension plan contributions and employees could count on a fixed retirement income.

Enter the 1980s.  Government began to strangle defined benefit plans, while defined contribution plans, such as 401(k)’s, exploded onto the retirement benefits scene.  They were simpler to understand, slightly less expensive to administer and employee driven.  And, unlike with defined benefit plans, the onus on saving for retirement fell on employees' shoulders.  Defined benefit plans were terminated at a record pace.

Now, three factors are renewing interest in defined benefit plans: Less-than-expected retirement benefits, a higher tax rate structure and an increasingly older population.

Recent studies show that Americans, particularly higher income workers and business owners, may face a retirement income shortfall.  Higher taxes on Social Security benefits, more active retirement lifestyles (and resulting expenses) and a lack of savings discipline are a few of the factors that may contribute to this shortfall.

The latter may be exacerbated by defined contribution plans.  When employees lack the discipline to save or the savvy to make their investment choices pay, it is their retirement savings that suffer.  With 401(k) plans, the onus on saving can fall squarely on employees.  Contrast how this differs from defined benefit plans, using the help of a theoretical bucket.

With some defined contributions such as 401(k) plans, employees have individual buckets with their names on them.  Each employee contributes—or doesn't contribute—to his or her bucket and, depending on the performance of the investment, the employee takes from that individual bucket at retirement.

With defined benefit plans, everybody's share comes from the same bucket.  The plan has a built-in discipline and a benefit—typically 60 to 75 percent of the average of an employee's last three years' salary—that are dependable.  This bucket is filled as needed to cover retirement liabilities.  Defined benefit plans are fully paid by the employer.

While defined benefit plans may be attractive to employees who have a hard time saving on their own, they are also more attractive to employers these days.  First, contributions to the plan and administrative expenses are tax-deductible.  Secondly, defined benefit plans offer advantages for older owners and key employees.

Annual contributions to a defined contribution plan are limited by law to $49,000 (2011 limits).  Not so with defined benefit plans—you can pay what is needed for retirement.  For older owners and employees, this element is key because they've had less time to save than younger individuals.  This also is particularly effective for higher paid individuals, who can occupy an effective tax rate tier as high as 50 percent during their working years.  If these people expect a lower tax rate during retirement, today's tax-sheltered savings can equal added retirement dollars tomorrow.

Remember, defined benefit plans aren't for everyone.  Candidates typically are companies with owners at least in their 40s, with a good stable profit history and the capability of meeting plan contributions that can vary from year to year. Additionally, these plans' restrictions and regulations still exist.  Overfunding and termination of these plans present special challenges, but a retirement plan advisor can suggest flexible options in these instances—more flexible than you might think.

And, contrary to popular belief, defined benefit plans are not only for the largest companies.  When business owners need to contribute more to a pension than defined contribution plans allow, or they want another vehicle in which to lessen today's increased tax burden, defined benefit plans are an increasingly attractive alternative.

Bryan Nelson is the President of HR Knowledge’s Financial Services Division.  HR Knowledge has a strategic relationship with David Levine a Registered Representative and Investment Advisor Representative of Equity Services, Inc. Securities and Investment Advisory Services are offered solely by Equity Services, Inc.  Member FINRA/SIPC.

The views and information herein have been prepared independently of the presenting Representative and are for informational purposes only.

 

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Federal Health Care Reform Update

Court challenges to the law: Federal district courts in Virginia and Florida ruled as unconstitutional the individual mandate contained in the health care reform. In their opinion, Congress did not have power under the Constitution to require citizens to purchase health insurance. Both of those cases have been appealed by the Obama administration to the U.S. Courts of Appeals covering those states. It’s anticipated the U.S. Supreme Court may ultimately decide this issue. In the meantime, the administration continues to implement and enforce the law.

Repeal of requirement for employers to provide “free-choice vouchers” to certain employees beginning in 2014: As part of the budget bill for the 2011 budget year, Congress repealed the requirement in the health care reform legislation requiring employers provide “free-choice vouchers” to certain employees beginning in 2014, when the health insurance exchanges are established. This would have required employers who paid any portion of the cost of health insurance for their employees to give “qualified employees” a voucher for the amount the employer would pay. The employee could then use that voucher to purchase health coverage from the exchange. For purposes of this requirement, a qualified employee was one whose required contribution for the employer-sponsored coverage was between 8 and 9.8 percent of the employee’s household income for the tax year. Employers were concerned this requirement would cause healthy employees to leave the employer plan to purchase less expensive coverage through the exchange.

For More Information Contact Us At:  www.hrknowledge.com

 

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

Federal Tax Credit in MA is your company Eligible and Compliant?

Did you know that if you're a "for-profit" employer in Massachusetts, you may be eligible for a federal tax credit through the Work Opportunity Tax Credit program (WOTC)?

Essentially, the WOTC program was developed to help qualifying individuals get a job.  Employers who hire a qualified individual will be entitled to a credit on their federal taxes.

According to the Executive Office of Labor Workforce and Development (EOLWD), qualifying individuals include:

-A member of a family that is receiving or has received Transitional Aid to Families with Dependent Children (TAFDC) benefits or Temporary Assistance to Needy Families (TANF) for any 9 months during the 18-month period that ends on the hiring date.
-A veteran who is a member of a family that is receiving or has recently received food stamps and certain qualified disabled veterans.
-A recently released ex-felon.
-An 18 to 39 year old resident of one of the 105 federally designated Empowerment Zone/Renewal Communities.
-A vocational rehabilitation referral who completed or is completing rehabilitative services from the Commonwealth of Massachusetts, an Employment Network, or the U.S. Department of Veterans Services.
-A 16 to 17 year old Empowerment Zone/Renewal Community resident hired between May 1 and September 15 as a Summer Youth Employee.
-An 18 to 39 year old member of a family that is receiving or has recently received food stamps.
-A recipient of Supplemental Security Income (SSI) benefits.
-A recipient of long term family assistance.

The credit may be up to $1,200 for a hired summer youth, $2,400 for a newly hired adult and $4,800 for a newly hired disabled veteran.

Prescreening is required and the employer and the qualified worker must sign form 8850, the
Pre-Screening Notice and Certification Request for the Work Opportunity Credit.  Act quickly because these forms must be sent to the Division of Career Services within 28 days of his/her's first day of work.

Find out more by visiting EOLWD website at www.mass.gov.

www.hrknowledge.com

508-339-1300 for more information call today!

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.

IRS Mileage Rate Increased for July 1, 2011

IRS Increases Standard Mileage Rate for Last Six Months of 2011

The IRS has increased the standard mileage rate to 55.5 cents per mile for business miles driven from July 1, 2011 through December 31, 2011. The standard mileage rate is an optional rate that taxpayers can use to calculate their deduction for the cost of using an automobile for business purposes. The IRS usually sets the standard mileage rate annually but decided to make this special adjustment for the second half of 2011 because of the recent increases in gasoline prices. The rate is 4.5 cents higher than the 51 cent rate that was in effect for the first six months of 2011.

Self-employed people can deduct their business miles using the standard mileage rate or by calculating actual costs. To use the standard mileage rate, you must use that method the first year you use the vehicle in your business, and you can't have claimed accelerated depreciation deductions or have taken any Section 179 deductions for the vehicle.

Injured workers who are receiving workers' compensation benefits from the State of California also use the IRS mileage rate when they request reimbursement for miles driven to and from medical appointments, pharmacies, and the like.

Effective Date: July 01, 2011

For More Information contact HR Knowledge, Inc. at www.hrknowledge.com

or CALL

508-339-1300

HR Knowledge is a provider of integrated HR, payroll and benefits services.  Our offices are located in the Boston, MA metro area and we service companies throughout the United States.