Vision Payroll

The American Recovery and Reinvestment Act of 2009 (the Act) made changes to continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA. Here are five fast facts on the changes related to employees:

1. The law became effective February 17, 2009 and applies to qualifying events occurring after August 31, 2008 and before January 1, 2010.
2. Involuntarily separated workers who elected COBRA continuation health coverage are only required to pay thirty-five percent of the required premiums.
3. Eligible individuals who did not elect COBRA coverage because it was unaffordable have sixty days to elect COBRA coverage.
4. The subsidy phases out for individuals with modified adjusted gross income over $125,000 and when modified adjusted gross income exceeds $145,000 individuals are no longer eligible. Those numbers increase to $250,000 and $290,000 for taxpayers filing joint returns.
5. The subsidy may last for up to nine months.

Over the next several days, Vision Payroll will be posting additional articles on implementing the changes to COBRA continuation coverage required by the Act as well as other changes to payroll and HR by other sections of the Act. We’re also planning a seminar on implementing these changes, so contact Vision Payroll if you’d like to attend.

This week’s question comes from Doug, head of HR. I heard that the new tax law will impact employees eligible for COBRA. How does the American Recovery and Reinvestment Act of 2009 (the Act) change COBRA continuation health coverage? Answer: Under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, certain former employees are allowed to continue health care coverage under their former’s employer’s group plan. The former employees must pay the cost of the health care premiums.

The Act made significant changes to COBRA continuation coverage. Under the Act, certain covered employees are required to pay only thirty-five percent of the premiums and their former employers must pay the remaining sixty-five percent. Employers may claim a credit on Form 941, Employer’s QUARTERLY Federal Tax Return, for the premiums paid for eligible employees.

The Internal Revenue Service recently released an updated Form 941 to reflect this law change and will soon release other updated forms, such as Form 941-X Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund.

Over the next several days, Vision Payroll will be posting additional articles on implementing the changes to COBRA continuation coverage required by the Act as well as other changes to payroll and HR by other sections of the Act. We’re also planning a seminar on implementing these changes, so contact Vision Payroll if you’d like to attend.

According to the US Department of Labor, in the week ending February 21, the advance figure for seasonally adjusted initial claims was 667,000, an increase of 36,000 from the previous week’s revised figure of 631,000. The 4-week moving average was 639,000, an increase of 19,000 from the previous week’s revised average of 620,000.

As part of the American Recovery and Reinvestment Act of 2009, the Internal Revenue Service (IRS) has released updated withholding tables. Though they won’t be published until new Publication 15-T is made available later this week, the IRS has released Notice 1036, Early Release Copies of New Wage Withholding and Advance Earned Income Credit Payment Tables and encouraged employers to start using them as soon as possible. The deadline for implementation of the new tables is April 1, 2009.

Workers are not required to file a new Form W-4, Employee’s Withholding Allowance Certificate or its Spanish equivalent, Formulario W-4(SP), Certificado de Exención de la Retención del Empleado to see the impact of the tax law change. The Making Work Pay credit is equal to 6.2% of earned income, up to a maximum of $400 for single taxpayers and $800 for those filing joint returns. Phaseouts of the credit begin at $75,000 of adjusted gross income (AGI) for singles and $150,000 AGI for those filing joint returns and the credit is eliminated for singles with more than $95,000 of AGI and joint returns with more than $190,000 of AGI. Taxpayers in this phaseout range or above due to multiple jobs, a spouse’s income, or unearned income should consider an amended Form W-4 or Formulario W-4(SP).

Vision Payroll has already implemented the revised withholding tables and eligible employees should start seeing an increase in take-home pay as early as today. Contact Vision Payroll if you have any further questions on the impact of the Making Work Pay credit.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2008-19. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA).

This Opinion Letter confirms that exempt store managers do not lose their exempt status while training to become area sales managers. The company chooses store managers who are top performers to enter a seven-week training program to become area sales managers. Eight to ten store managers report to one area sales manager. At the beginning of the training period, the trainee performs little to no exempt work. As the program progresses, the trainee gradually assumes most to all of the responsibilities of the trainer. Successful trainees return to their store manager position to await an opening and a promotion. Unsuccessful trainees just return to store manager duties.

For this letter, the DOL assumed that both the store manager and area sales manger positions were exempt. Even though for some weeks of the training, the trainees may have performed mostly non-exempt work, the executive exemption need not be met or tested on a week-by-week basis. Since the primary duty of the trainees remained as store managers and since they did not perform “work that would otherwise be performed by nonexempt workers”, there is no reason for the trainees to lose their exempt status during the training program.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2008-18. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA).

This Opinion Letter is a response to a request to treat itamae-sushi and teppanyaki chefs as tipped employees and thus allow them to participate in tip pools. Itamae-sushi chefs work in the bar area and prepare sushi that they serve to customers. Teppanyaki chefs prepare meals at customer tables on a teppan table and also serve the meals to the customers. Along with the itamae-sushi and teppanyaki chefs, servers, bussers, bartenders, and counter workers participate in the tip polls, while cooks and dishwashers do not. All participants regularly receive more than $30 per month in tips.

Itamae-sushi and teppanyaki chefs are more akin to counter workers who cook and serve food to customers than to typical chefs. Counter workers are allowed to share in tip pools. Since “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips” is a tipped employee, itamae-sushi and teppanyaki chefs may both participate in the tip polls and be considered tipped employees.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2008-17. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA).

This Opinion Letter clarifies that Certified Occupational Therapist Assistants (COTAs) employed by a school district do not qualify as either exempt professionals or exempt administrative employees in educational establishments. The COTAs were requesting to be reclassified from nonexempt paraprofessionals to exempt professional employees.

The educational requirement for COTAs “is that which is sufficient to obtain certification by the state Board of Occupational Therapy Examiners.” This requires “at least 60 academic semester credits or the equivalent from an accredited institution of higher education.” The DOL ruled that completion of only “60 semester hours does not qualify as a ‘prolonged course of specialized intellectual instruction.’” Additionally, COTAs do not meet the standards to qualify as registered or certified medical technologists.

Also, since COTAs primary duty is related to the health of the students, they do not qualify under the administrative exemption for employees in educational establishments.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2008-16. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA).

This Opinion Letter considers whether a Latino Victim Specialist (LVS) may also volunteer as a Reserve Police Officer (RPO) for the same public agency. As an LVS, the employee provides “counseling and other assistance to, among others, victims of crime, families experiencing domestic violence, citizens with mental or psychological difficulties who become involved in law enforcement matters, homeless persons, and parents having difficulties with delinquent children.” Since these duties are not the duties of law enforcement personnel, the employee is not considered to provide the “same type of services” when volunteering as when performing regular paid duties.

A second consideration is that volunteers cannot receive compensation, but may receive a combination of “expenses, reasonable benefits, or a nominal fee.” In certain situations when it needs extra police help for special assignments, the Police Department requests that the RPOs work and pays the RPOs the equivalent of entry-level pay for a regular Police Officer. Since this payment is clearly more than the DOL established standard of twenty percent of pay for a comparable position, this pay is more than nominal. There is no need to combine the hours worked as an LVS with the hours worked as an RPO, however, to determine if the employee is entitled to overtime pay for a particular pay period. Employees who “work occasionally or sporadically on a part-time basis for the same public agency in a different capacity from their regular employment” do not need to have their hours combined for overtime purposes under the FLSA.

Lastly, even though the LVS may not volunteer during weeks in which the individual receives compensation as an RPO, those weeks are not a part of regular duties as an RPO. Therefore, the LVS may volunteer as an RPO during weeks in which the Police Department does not request compensated RPO service. The Police Department may “terminate the LVS’s occasional and sporadic part-time employment as an RPO at the conclusion of such special assignments and return him or her to volunteer RPO status during other workweeks in which no compensated work is performed” so long as it is not done with intent to circumvent the FLSA.

State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

This week’s question comes from Angela, a part-time employee. I only work a few hours each month to help with school expenses. I claimed exemption from withholding when I started work last year. Yesterday’s check had federal withholding for the first time. Why did federal income tax withholding start on my wages? Answer: Employees who have provided a Form W-4, Employee’s Withholding Allowance Certificate, claiming exemption from federal income tax withholding needed to file a new 2009 Form W-4 by February 16, 2009 in order to continue their exemption from federal income tax withholding. Any employee who did not provide a 2009 Form W-4 claiming exemption before last Monday must have tax withheld based on a previously filed Form W-4 not claiming exemption, if available, or using single, zero allowances, if not. File a new Form W-4 or Formulario W-4(SP), Certificado de Exención de la Retención del Empleado to claim exemption from withholding or to correct the number of withholding allowances claimed. Employers may not refund any federal income tax withheld unless the over-withheld tax was due to a calculation error. Tax properly withheld from an employee who failed to file an updated Form W-4 is not considered tax withheld due to a calculation error. Employers should update the allowances claimed by logging in to their company file or providing Vision Payroll with the updated information.

According to the US Department of Labor, in the week ending February 14, the advance figure for seasonally adjusted initial claims was 627,000, unchanged from the previous week’s revised figure of 627,000. The 4-week moving average was 619,000, an increase of 10,500 from the previous week’s revised average of 608,500.