Vision Payroll

Employers must constantly navigate a minefield of state and federal wage and hour laws. Effectively avoiding common employer pitfalls could save your business thousands of dollars every year. How do you determine which workers should be classified as independent contractors and which as employees? What is the difference between exempt and non-exempt? How should employers deal with employees who work without supervisory authorization?

You’ll learn the answers to these questions and much more, including the potential impact of the multi-agency Misclassification Initiative from the 10 Ways to Avoid Wage and Hour Pitfalls in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. These tips include information on the impact of state laws on wage and hour pitfalls as well as additional valuable information.

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.

The US Department of Labor recently announced the publication of a final rule to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants by providing a safe harbor period of seven business days following receipt or withholding by employers.

“This rule will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner,” said Phyllis C. Borzi, assistant secretary of labor for the department’s Employee Benefits Security Administration. “We estimate participant accounts could grow by $19 to $44 million as a result of these rules.”

Currently, employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The final rule amends the participant contribution rules to create a safe harbor period under which participant contributions to a small plan will be deemed to comply with the law if those amounts are deposited with the plan within seven business days of receipt or withholding. The final rule is consistent with the proposed rule. The department did not expand the safe harbor to cover plans with 100 or more participants due to a lack of information and data sufficient to evaluate current practices of such employers and assess the costs, benefits and risks to participants associated with extending the safe harbor to large plans.

The final rule was published in the January 14, 2010, edition of the Federal Register and was effective on the date of publication. Contact Vision Payroll if you have further questions.

The Massachusetts Division of Unemployment Assistance (DUA) has released the 2010 employer contribution rates for unemployment taxes. Employers may check their rate using QUEST. Rates were determined using Schedule E, the same schedule as was used in 2009. Even though the rate schedule remained the same, individual employer rates generally changed based on activity in their account during the measurement period of October 1, 2008 to September 30, 2009. Since the rates were released late in the quarter, some employers may have significant overpayments or underpayments of tax because the rate differential must be applied to all subject wages for the entire first quarter.

Employers who received their rate decrease before the last payroll of the quarter will receive a credit in the last payroll of the quarter for the difference between the tax collected and the tax now due using the new rate. Employers who received their rate decrease after the last payroll of the quarter will receive a refund check for the difference between the tax collected and the tax now due using the new rate.

Employers who received their rate increase before the last payroll of the quarter will need to pay the additional tax equal to the difference between the tax collected and the tax now due using the new rate in the last payroll of the quarter. Employers who received their rate increase after the last payroll of the quarter will need to pay the additional tax equal to the difference between the tax collected and the tax now due using the new rate in an additional end-of-quarter payroll.

The adjustment in the last payroll or additional payroll should be the only adjustment required to correct the tax liability for 2010. Contact Vision Payroll if you have further questions on the 2010 employer contribution rates for unemployment taxes.

The Massachusetts Division of Unemployment Assistance (DUA) has released the UHI contribution rates for 2010. According to MGL c. 151A, §14G(f):

There shall be a rate review board composed of the commissioner of medical assistance or his designee, the deputy director of employment and training or his designee and the commissioner of insurance or his designee. The rate review board shall determine if the unemployment health insurance contribution rate and the unemployment health insurance contribution wage base established in this section shall be adequate to provide for the estimated costs for the subsequent year of unemployment health insurance programs established pursuant to subsection (j) provided by said division of employment and training. If in the opinion of said board the unemployment health insurance contribution wage base or the unemployment health insurance contribution rate as established above would be inadequate to properly fund the unemployment health insurance program, said rate of health insurance inflation or the unemployment health insurance contribution rate shall be appropriately adjusted in order to properly fund said unemployment health insurance program.

On or before November 30 of each year, the deputy director of employment and training shall certify to said board the estimated costs for the subsequent year of health insurance programs provided by the division of employment and training for individuals and their families who are eligible for the health insurance program established by subsection (j) for individuals receiving unemployment insurance compensation. Such estimated costs shall be exclusive of amounts to be covered by premiums, co-payments, deductibles and co-insurance to be paid by covered individuals and any anticipated appropriations. The rate review board shall further adjust such estimated costs to reflect prudent levels of reserves sufficient to carry out the responsibilities of the division of employment and training for said unemployment health insurance program. If in the opinion of said board the rate of health insurance inflation on the unemployment health insurance contribution wage base as established or calculated above would be inadequate to properly fund said unemployment health insurance program, said rate of health insurance inflation or the unemployment health insurance contribution rate shall be appropriately adjusted in order to properly fund said health insurance programs.

According to the DUA, for 2010 rates will be as follows:

The health insurance contribution rate is a flat rate of 0.24% for calendar year 2010 for all subject employers—except for those meeting the exempt or reduced rate criteria. (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 questions on the 2010 UHI contribution rates.

Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. In order to qualify under the HIRE Act, the wages must be paid by a qualified employer “with respect to employment” in the period beginning March 19, 2010 and ending December 31, 2010. Additionally, the wages must be “for services performed…in a trade or business of such qualified employer” or for exempt employers, “in furtherance of the activities related to the purpose or function constituting the basis of the employer’s exemption under section 501.” Contact Vision Payroll if you have further questions on the HIRE Act.

This week’s question comes from Sean, an HR director. We are in the process of hiring some employees who would allow us to claim exemption from paying the employer’s share of social security taxes because of the HIRE Act. Some employees are hesitant due to the impact on their future social security benefits. How does the HIRE Act affect employees’ future social security benefits? Answer: Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. Although employers may be exempt from paying the taxes, there is no impact on any employee’s future social security benefits. Contact Vision Payroll if you have further questions on the HIRE Act.

According to the US Department of Labor, in the week ending March 20, the advance figure for seasonally adjusted initial claims was 442,000, a decrease of 14,000 from the previous week’s revised figure of 456,000. The 4-week moving average was 453,750, a decrease of 11,000 from the previous week’s revised average of 464,750.

The advance seasonally adjusted insured unemployment rate was 3.6% for the week ending March 13, unchanged from the prior week’s revised rate of 3.6%.

The advance number for seasonally adjusted insured unemployment during the week ending March 13 was 4,648,000, a decrease of 54,000 from the preceding week’s revised level of 4,702,000. The 4-week moving average was 4,689,000, a decrease of 36,500 from the preceding week’s revised average of 4,725,500.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.140 million.

Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. Employers who claim the exemption under the HIRE Act may not claim the Work Opportunity Tax Credit with respect to wages paid for which the HIRE Act exemption is claimed. The Internal Revenue Service (IRS) is authorized under the HIRE Act to prescribe the manner for making an election to have this section of the HIRE Act not apply. Employers who would receive greater benefit under the Work Opportunity Tax Credit should consider making the election. Vision Payroll strongly recommends that employers consult their income tax advisor before claiming the exemption or electing not to claim the exemption under the HIRE Act.

Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. Exempt wages are those paid “with respect to employment during the period beginning [March 19, 2010] and ending on December 31, 2010.” The “with respect to employment” phrase seems to indicate that employers will be able to claim exemption for wages paid at any time as long as the employment period for which the wages were earned is before January 1, 2011. Therefore, wages paid during 2011 may also qualify if paid “with respect to employment” during 2010. Contact Vision Payroll if you have further questions on the HIRE Act.

Under the Hiring Incentives to Restore Employment Act (HIRE Act), employers who hire certain unemployed workers are allowed not to pay certain employment taxes. Most employers are eligible for this exemption. According to the HIRE Act, a “qualified employer” is any employer other than the United States, any State, or any political subdivision thereof, or any instrumentality of the foregoing, although “a public institution of higher education (as defined in section 101(b) of the Higher Education Act of 1965)” also is a qualified employer, even if a public institution. Contact Vision Payroll if you have further questions on the HIRE Act.