Category Archives for Posts

February Congruity

February Congruity Q&A: Benefit Eligibility

Question:
If an employee's hours are reduced below 30 hours per week, would the employee need to stay in the health plan even if they longer meet the eligibility requirements?

Answer:
In accordance with the Affordable Care Act’s (ACA’s) employer shared responsibility provision (so-called “play or pay” rules), 

there are two measurement methods to determine health coverage eligibility: the monthly method or the look-back method. Under the look-back method, employees who averaged at least 30 hours per week in the measurement period are deemed eligible for the subsequent stability period, even if their hours are reduced to fewer than 30 hours per week. In other words, if an employee chooses to enroll, their medical plan coverage will automatically continue for the entire stability period.

Further, if the coverage is part of a cafeteria plan (which allows employees to make pretax contributions), they would not be able to drop the coverage since their eligibility has not changed. Fortunately, the IRS recognized that employees in a stability period whose work hours are reduced could become stuck in a plan they no longer want or can afford. So, the IRS revised the cafeteria plan rules to give the employer the option of amending its plan to allow employees to drop coverage if certain criteria are met.

Specifically, an employee may elect to drop coverage due to the reduction in hours, provided the employee intends to enroll in another plan providing minimum essential coverage with the new coverage effective no later than the first day of the second month following the date the original coverage is dropped.

To recap, the employer’s cafeteria plan may allow an employee to drop medical coverage (but not dental/vision coverage or a health flexible spending account (HFSA) during the stability period if:

  • The employee has a change in employment status and will reasonably be expected to average less than 30 hours of service per week; and
  • The employee intends to enroll in another medical plan (such as a spouse’s plan or a Marketplace plan) by the start of the second month after dropping this employer’s plan.

To allow this election change, the employer must amend its § 125 cafeteria plan and adopt the amendment by the end of the plan year in which the election change is allowed. The employer also must inform all cafeteria plan participants of the amendment.

For more information contact Congruity's team of professionals at: 844.247.4100.

January Congruity

January Congruity Q&A: Wage & Hour Audit / Davis-Bacon

Question:
When the Department of Labor's Wage and Hour Division (WHD) conducts an unannounced investigation to determine compliance with the Davis-Bacon Act, is the auditor permitted to speak with employees?

Answer:
"Yes". As with any investigation conducted by the WHD for enforcement with federal labor standards, an auditor is permitted to speak with employees privately and without advance notice during an investigation. 

The WHD is charged with enforcing the Davis-Bacon Act , a law that requires that employers who have federal contracts over $2,000 for the construction or repair of public buildings or public works pay certain prevailing wages and fringe benefits to the laborers and skilled tradesmen employed under the contract. According to the WHD, investigators have the latitude to initiate unannounced investigations in order to directly observe normal business operations and determine factual information quickly. An investigation may include review of staff, payroll records, contract assignments, or other fact-gathering sources.

Although these investigations may be conducted for various reasons, many are initiated by employee complaints. Check your contracts and audit your records to ensure that your pay practices are in line with the prevailing wage and fringe benefits rates.

For more information contact Congruity's team of professionals at: 844.247.4100.

Drug Testing

Drug Testing of Unemployment Compensation Applicants

The U.S. Department of Labor (DOL) recently published a notice of proposed rule-making (NPRM, document number 2018-23952) in the Federal Register proposing that states be permitted to enact legislation to require drug testing for a far larger group of unemployment compensation applicants than the previous rules permitted. According to the NPRM,

“This flexibility is intended to respect the diversity of States’ economies and the different roles played by employment drug testing in those economies. The DOL recognizes that imposing a nationally uniform list may not fully effectuate Congress’ intent that States be permitted to drug test when the only suitable work for an applicant is in an occupation that regularly conducts such tests.” This proposed rule would replace a 2016 DOL Rule that outlines specific occupations for which drug-testing would be permissible.

The comment period ends in 51 days, and written comments to the NPRM must be submitted on or before January 4, 2019.

For more information contact Congruity's team of professionals at: 844.247.4100.

December Congruity

December Congruity Q&A: PTO for Religious Holidays.

Question:
When employers provide employees with time off from work for religious holidays, are employers also required to pay employees during this leave of absence?

Answer:
Federal law does not require employers to compensate employees for time taken off in observance of a religious holiday, practice, or belief. However, the requirements of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, 

et seq., must be followed. Under the FLSA, an employer is not required to pay nonexempt employees for time off on a holiday, but must pay only for time actually worked. Alternatively, exempt employees who are given the day off must be paid their full weekly salary if they work any hours during the week in which the holiday falls. Employees may be allowed to use accrued paid time off or vacation for their absences due to religious holidays. For more information contact Congruity's team of professionals at: 844.247.4100.

November Congruity

November Congruity Q&A: What Information Should Be Included In An Employee File?

Question:
Should an employee's background check, interview notes, and benefit information be kept separate from the personnel file?

Answer:
"Yes". As a best practice, background checks and interview notes should be kept separately from the employee’s personnel file because those documents were part of the pre-employment 

process and serve a purpose that differs from ongoing employment. Other sensitive or highly-confidential benefits and personal information should also be maintained separately from the regular personnel file.

The rationale is that the personnel file is generally used by managers to review historical performance, training records, or other pertinent employee accomplishments for making employment decisions. Benefits and other confidential personal data should not be a factor in those decisions.

The personnel file generally contains the following documents:

  • Job description for the employment position and job advertisements. 
  • Offer of employment. 
  • Employment contract (if applicable). 
  • Job application. 
  • Employee’s resume. 
  • Signed employee handbook acknowledgement. 
  • Forms providing next of kin and emergency contacts. 
  • Documents acknowledging receipt and review of other employer policies, such as nondisclosure, arbitration of employment disputes, safety practices, or other company-specific rules. 
  • Performance reviews and other performance-related documentation. 
  • Certifications, training taken, awards, etc.

Types of separate confidential files:

  • Pre-employment file, including background checks, interview notes, assessment results, work samples, and other information used in the selection process. 
  • Payroll file, including Form W-4 and other payroll-related information. 
  • Benefits file, including benefits enrollment, beneficiary designations, leave of absence forms, or other confidential medical information. 
  • Forms I-9 verifying employment eligibility. 
  • Investigation files (if applicable). 
  • EEO records.

If you still have concerns about how to file documents, consider the following questions:

  • Will a supervisor or manager have access to the document?
  • ​Is the information contained in the document relevant to an employment decision?
  • Is it related to the employee’s performance, knowledge, skills, abilities, or behavior?

If the answer is "yes" to these questions, then the document likely belongs in the employee’s personnel file. If the answer is "no" to any of the questions, then it’s better to err on the side of caution and maintain the document in a confidential file.

For more information contact Congruity's team of professionals at: 844.247.4100.

IRA Limit Increase

401(k) & IRA Limits Increase for 2019

On November 1, 2018, the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019 along with technical guidance in Notice 2018-83.

Highlights of Changes for 2019

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increases from $18,500 to $19,000. 

The limit on annual contributions to an Individual Retirement Arrangement (IRA), which last increased in 2013, increases from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the saver’s credit all increase for 2019.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)

The phase-out ranges for 2019 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

For questions, or additional information contact Team of Professionals at Congruity HR: 844.247.4100

Redesigned

Redesigned W-4 Form Coming In 2020

The Treasury Department recently announced that the IRS will implement a redesigned W-4 form for tax year 2020, a timeline that will allow for continued work to refine the new approach for the form. As a result of the

enactment of the 2017 Tax Cuts and Jobs Act, the Treasury Department and the IRS are revising the wage withholding system and Form W-4, Employee’s Withholding Allowance Certificate. In June 2018, the IRS released a draft redesigned form for public comment and received many suggestions for improvements, which they are working to integrate.

For tax year 2019, the IRS will release an update to the Form W-4 that is similar to the 2018 version currently in use. The 2019 form will be released in the coming weeks according to the usual practice for annual updates.

The Treasury Department and IRS will continue working closely with the payroll and the tax community as additional changes are made to the Form W-4 for use in 2020. The intent of these additional changes is to make the withholding system more accurate and more transparent to employees. The IRS will release the 2020 form and related guidance and information early enough in 2019 to allow employers and payroll processors ample time to update their systems.

For more information, contact the Team of Professionals at Congruity HR: 844.247.4100.

E-Verify

E-Verify Expands Access to DMV Records

On September 17, 2018, the Department of Homeland Security and United States Citizenship and Immigration Service

announced that E-Verify expanded its access to Department of Motor Vehicles (DMV) records. Subsequently, if an employee presents a driver’s license or state ID card as a List B document for Form I-9, and if the document is issued by one of the states and territories under E-Verify’s expanded access, E-Verify will prompt the user to enter the document information into E-Verify. E-Verify is using this process to prepare for an expansion of driver’s license and state ID verification capabilities.

Note that states participating in the Records and Information from DMVs for E-Verify (RIDE) program will continue to verify the validity of driver’s license and state ID card information.

For more information, contact the Team of Professionals at Congruity HR: 844.247.4100.

September Congruity

September Congruity Q&A: Calculating Overtime On Hourly Employees Who Receive Non-discretionary

Question:

How do we handle overtime pay calculations for hourly employees when they receive non-discretionary bonuses?

Answer:

A non-discretionary bonus is a bonus based on an employee meeting criteria such as 

production, sales, quality, efficiency, or other performance standards. The federal Fair Labor Standards Act (FLSA) requires that overtime pay be calculated based on an hourly employee’s regular rate of pay, which includes commissions and non-discretionary bonuses.

Under the FLSA, non-discretionary bonuses must be apportioned back to the workweeks covered by the bonus period. If the hourly employee who earned the bonus also worked overtime during any workweek of a period covered by the bonus, you must recalculate the regular rate to determine the appropriate overtime rate.

For example, suppose your hourly employee’s regular hourly rate is $10. Assume the non-discretionary bonus is $100 per month, but the pay period is weekly. Now assume the employee worked 50 hours each week and the work month was exactly four weeks. The following steps show how to calculate this employee’s weekly pay:

1. 50 (total hours worked) x $10 (regular rate) = $500
2. $500 (weekly pay) + $25 (weekly non-discretionary bonus) = $5253. $525 (total pay) ÷ 50 (total hours worked) = $10.50 (regular rate)4. $10.50 (regular rate) x 1½ (overtime multiplier) = $15.75 (overtime rate)5. 40 (straight time hours) x $10.50 (regular rate) = $420 (straight time earnings)6. 10 (overtime hours) x $15.75 (overtime rate) = $157.50 (overtime earnings)7. $420 (straight time earnings) + $157.50 (overtime earnings) = $577.50 total weekly pay

If you cannot identify the specific weeks in which the bonus was earned, then the bonus must be allocated across the entire bonus period. If the bonus was earned over a calendar year, you must:

1. Divide the bonus by 52.2. Add that sum to the wages earned during the workweek.3. Recalculate the regular rate.4. Pay additional time-and-a-half based on the regular rate for all hours worked over 40.
For example, if an hourly employee is given a year-end non-discretionary bonus of $1,000, $19.23 ($1,000 ÷ 52) must be added to the wages in any workweek in which the employee worked more than 40 hours. You must then recalculate the regular rate (and corresponding overtime premiums) for each week, incorporating these revised numbers.

Note: that California requires employers to use a different overtime calculation method when including bonus or commissions. The California rules calculate the overtime rate using the employee’s non-overtime hours only, plus bonus or commission, where the FLSA uses all hours worked by the employee.

For more information, contact the Congruity HR team of professionals at: 844.247.4100.

IRS Permits Students Loan

IRS Permits Student Loan Repayment Benefit as Part of Employer’s 401(K)

On August 17, 2018, the federal Internal Revenue Service released a private ruling letter (Number 201833012) concluding that an employer may amend its 401(k) plan to provide student loan repayments (SLR) nonelective contributions under the program without violating the “contingent benefit” prohibitions of 26 U.S.C. § 401(k)(4)(A) and § 1.401(k)-1(e)(6).

The ruling assumes that the employer will

not extend any student loans to employees eligible for the program and details how SLR payments may be linked to the employer’s 401(k) plan.

The ruling is directed only to the employer (referred to in the letter as an “individual taxpayer”) who requested it and may not be used or cited as precedent. However, the private ruling carries significant weight because it permits a new type of student loan repayment through an employer’s 401(k).