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The Internal Revenue Service (IRS) recently released Notice 2009-66, Automatic Enrollment in SIMPLE IRAs. Notice 2009-66, in question-and-answer format, provides rules for employers that maintain SIMPLE IRA plans. It confirms that SIMPLE IRAs may do the following:

1. Include an automatic contribution arrangement;
2. Provide that default salary reduction contributions made under an automatic contribution arrangement are made only for employees who are first eligible under the SIMPLE IRA plan on or after the effective date of the automatic contribution arrangement and who do not make an affirmative election;
3. Provide that the percentage of compensation at which default salary reduction contributions under an automatic contribution arrangement are made for an employee increases based on the number of years or portions of years for which default salary reduction contributions have been made for the employee.

Notice 2009-66 also reviews the changes in notice requirements for SIMPLE IRAs that include an automatic contribution arrangement, explains the transfer rights that employees must receive during their 60-day election period, and confirms that if the requirements of the regulations under §404(c)(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”) are met, fiduciary relief will apply with respect to the investment of default salary reduction contributions in default investments.

Contact Vision Payroll if you have any further questions on Notice 2009-66.

The Internal Revenue Service (IRS) recently released Notice 2009-65, Adding Automatic Enrollment to Section 401(k) Plans – Sample Amendments. The Notice contains two sample amendments that allow employers to change existing §401(k) plans as late as the last day of the first plan year beginning after December 31, 2008. For government plans, the amendment may be adopted as late as the last day of the first plan year beginning after December 31, 2010. Plan sponsors are not required to adopt the amendments and may need to tailor the amendments to match provisions of their specific plans.

The first sample amendment can be used to add an automatic contribution arrangement to a §401(k) plan. The second sample amendment can be used to add an automatic contribution arrangement described in §414(w) of the Internal Revenue Code of 1986 (permitting 90-day withdrawals) to a §401(k) plan.

Contact Vision Payroll if you have any further questions on Notice 2009-65.

This week’s question comes from Michelle, a small business owner. I have not had to pay Massachusetts HICA tax all quarter. Now I have to pay it with the last payroll of the quarter. Why do we have to pay Massachusetts HICA tax this payroll? Answer: The Massachusetts Unemployment Health Insurance Quarterly Contribution (HICA) is required when the average employee count is six or greater for a quarter. Employers must pay contributions on the first $14,000 of each employee’s covered wages during the calendar year. The amount of the contribution is derived by multiplying these wages by an assigned rate. The health insurance contribution rate is 0.12% for most subject employers. Employers operating within two calendar years following the newly subject status pay at rates of 0.04% and 0.08% respectively. Contact Vision Payroll if you have any further questions.

According to the US Department of Labor, in the week ending September 12, the advance figure for seasonally adjusted initial claims was 545,000, a decrease of 12,000 from the previous week’s revised figure of 557,000. The 4-week moving average was 563,000, a decrease of 8,750 from the previous week’s revised average of 571,750.

The advance seasonally adjusted insured unemployment rate was 4.7% for the week ending September 5, an increase of 0.1 percentage points from the prior week’s unrevised rate of 4.6%.

The advance number for seasonally adjusted insured unemployment during the week ending September 5 was 6,230,000, an increase of 129,000 from the preceding week’s revised level of 6,101,000. The 4-week moving average was 6,180,250, a decrease of 5,500 from the preceding week’s revised average of 6,185,750.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.636 million.

Employers are increasingly receiving requests for time off for employees to attend to their children’s school activities. It’s important to learn how state laws, company policies, and business needs impact such requests and how the leave is granted. Which employers are impacted? What rules apply to such requests? What limitations should be considered?

Learn the answers to these questions and much more in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter.

You’ll learn how laws such as the Small Necessities Leave Act in Massachusetts and the Family School Partnership Act in California impact employers and how multi-state employers should be aware of the different requirements in such diverse states as Louisiana, Minnesota, Nevada, and Vermont, all of which have recently enacted changes in this area.

Visit MyHRSupportCenter regularly not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

Due to severe storms and flooding in New York on August 8, 2009, President Barack Obama declared the following counties a federal disaster area: Cattaraugus, Chautauqua and Erie. Therefore, the Internal Revenue Service (IRS) announced recently that it will waive failure to deposit penalties for employment and excise taxes due after August 7, 2009 and before August 25, 2009 as long as the deposits were made by August 24, 2009. In addition, affected taxpayers will have until October 7, 2009 to file most tax returns. Contact Vision Payroll if you were affected by the severe storms and flooding and need further information on the relief provided by the IRS.

The Internal Revenue Service (IRS) recently released Revenue Ruling 2009-32, Paid Time Off Contributions at Termination of Employment. This Revenue Ruling addressed two issues:

1. Do the amendments described [in the ruling] to an existing qualified profit sharing plan requiring or permitting certain contributions to the plan of the dollar equivalent of unused paid time off at a participant’s termination of employment cause the plan to fail to meet the requirements of §401(a) and, if applicable, §401(k) of the Internal Revenue Code of 1986 (IRC)?
2. When is a participant required to recognize gross income with respect to the contributions to the qualified profit-sharing plan and payments to the participant as described [in the ruling]?

In situation 1, the IRS concludes as follows:

Under the facts presented, the amendments requiring or permitting certain contributions of the dollar equivalent of unused paid time off to a qualified profit-sharing plan do not cause the plan to fail to meet the qualification requirements of IRC §401(a), provided that the contributions satisfy the applicable requirements of IRC §401(a)(4) and IRC §415(c) and, where applicable, IRC §401(k) and IRC §401(a)(30).

In situation 2, the IRS concludes as follows:

Under the facts presented, assuming the applicable qualification requirements are satisfied, a participant does not include in gross income contributions of the dollar equivalent of unused paid time off to the profit sharing plan in accordance with IRC §402(a) until distributions are made to the participant from the plan and does not include in gross income an amount paid for the dollar equivalent of unused paid time off that is not contributed to the profit-sharing plan until the taxable year in which the amount is paid to the participant.

Contact Vision Payroll if you have any further questions on annual paid time off contributions.

The Internal Revenue Service (IRS) recently released Revenue Ruling 2009-31, Annual Paid Time Off Contributions. This Revenue Ruling addressed two issues:

1. Do the amendments described [in the ruling] to an existing qualified profit sharing plan requiring or permitting certain annual contributions of the dollar equivalent of unused paid time off cause the plan to fail to meet the requirements of §401(a) and, if applicable, §401(k) of the Internal Revenue Code of 1986 (IRC)?
2. When is a participant required to recognize gross income with respect to the contributions to the qualified profit-sharing plan and payments to the participant as described [in the ruling]?

In situation 1, the IRS concludes as follows:

Under the facts presented, the amendments requiring or permitting certain contributions of the dollar equivalent of unused paid time off to a qualified profit-sharing plan do not cause the plan to fail to meet the qualification requirements of IRC §401(a), provided that the contributions satisfy the applicable requirements of IRC §401(a)(4) and IRC §415(c) and, where applicable, IRC §401(k) and IRC §401(a)(30).

In situation 2, the IRS concludes as follows:

Under the facts presented, assuming the applicable qualification requirements are satisfied, a participant does not include in gross income contributions of the dollar equivalent of unused paid time off to the profit sharing plan in accordance with IRC §402(a) until distributions are made to the participant from the plan and does not include in gross income an amount paid for the dollar equivalent of unused paid time off that is not contributed to the profit-sharing plan until the taxable year in which the amount is paid to the participant.

Contact Vision Payroll if you have any further questions on annual paid time off contributions.

The Internal Revenue Service (IRS) recently released Revenue Ruling 2009-30, Automatic Contribution Increases under Automatic Contribution Arrangements. This Revenue Ruling addressed two issues:

1. Will default contributions to a profit-sharing plan fail to be considered elective contributions merely because they are made pursuant to an automatic contribution arrangement under which an eligible employee’s default contribution percentage automatically increases in plan years after the first plan year of the eligible employee’s participation in the automatic contribution arrangement based in part on increases in the eligible employee’s plan compensation?
2. Will default contributions under an automatic contribution arrangement fail to satisfy the qualified percentage requirement (including uniformity and minimum percentage requirements) relating to a “qualified automatic contribution arrangement” under §401(k)(13) of the Internal Revenue Code of 1986 (IRC) (providing an automatic enrollment nondiscrimination safe harbor) or the uniformity requirement relating to an “eligible automatic contribution arrangement” under IRC §414(w) (permitting 90-day withdrawals) merely because default contributions are made pursuant to an arrangement under which the default contribution percentage for all eligible employees increases on a date other than the first day of a plan year?

In situation 1, the IRS concludes as follows:

Default contributions to a profit-sharing plan will not fail to be considered elective contributions merely because they are made pursuant to an automatic contribution arrangement under which an eligible employee’s default contribution percentage automatically increases in plan years after the first plan year of the eligible employee’s participation in the automatic contribution arrangement based in part on increases in the eligible employee’s plan compensation.

In situation 2, the IRS concludes as follows:

Default contributions under an automatic contribution arrangement will not fail to satisfy the qualified percentage requirement (including uniformity and minimum percentage requirements) relating to a qualified automatic contribution arrangement or the uniformity requirement relating to an eligible automatic contribution arrangement merely because default contributions are made pursuant to an arrangement under which the default contribution percentage for all eligible employees increases on a date other than the first day of a plan year.

Contact Vision Payroll if you have any further questions on automatic contribution increases under automatic contribution arrangements.

This week’s question comes from Kim, a business owner. We have an employee who never shows up for work the Friday before a holiday. Can we require employees to work the day before or after a holiday? Answer: Employers may condition holiday pay on attendance, i.e., employers may require employees to work on the scheduled workday before and after the holiday to receive holiday pay. Some employers have exception policies that allow employees to schedule vacation around a holiday, to take a personal day with advanced notice, or to take a sick day with a note from a doctor. Other employers strictly enforce the policy and do not allow exceptions. Contact Vision Payroll if you have any further questions on holiday pay.