Primer: Illinois Secure Choice Savings Act

The Illinois Secure Choice Savings Act was adopted in 2015 and is finally set to begin implementation in November of 2018.

Unless it isn’t.

In an eleventh hour move, on August 14, 2018, Illinois Governor Rauner issued an amendatory veto to the bill which would have a large impact if passed. The biggest impact would make the program permissive and not mandatory. At this time, a final decision may not be made until November. You can read the full proposed amendment here.

But because we like to be ready for anything, let’s get a fundamental understanding of the requirements of the Secure Choice Savings Act in case it does become mandatory.

A summary of the requirements:

Which Employers will be required to comply?

  1. Those that have at least 25 employees working in the state of Illinois,
  2. Have been operating in Illinois for at least two years, and
  3. Do not offer a qualified retirement plan to Illinois employees. (A qualified retirement plan under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).)

Which Employees are eligible?

  1. Full-time and part-time employees are eligible
  2. Seasonal employees are eligible if they work for more than 60 days with the employer

For required Employers, what will be their responsibilities?

  1. Distribute program information and materials that will be provided by the Secure Choice Program Manager
  2. Facilitate employee enrollments
  3. Setup payroll deductions
  4. Remit employee deferral contributions

The program will not require employers to make employer contributions, pay administrative fees, act as a plan managers or fiduciaries, or take on any obligations under ERISA.

Proposed Program Roll-Out

The program is currently set to be rolled out in three waves; starting with the largest employers late this year, moving to smaller employers by late next year. Here are the details:

Wave 1- November 2018
  • For employers with at least 500 employees
  • Employers have until December 2018 to enroll employees and deductions begin January 2019
Wave 2- July 2019
  • For employers with 100-499 employees
Wave 3- November 2019
  • For employers with 25-99 employees

What comes next?

The FAQs on the Illinois Secure Choice site explain that the State will notify employers directly when they will be required to register or certify that they are exempt from the program. The notice will include instructions and due dates.

Key Takeaway

If you do not already have a qualified retirement savings plan in place for your employees, now may be a good time to start a cost/benefit analysis comparing a qualified plan (401k, 403b, etc) vs. a state-based plan like the ones proposed in the IL Secure Choice Savings Act.

We will continue to keep StratEx clients updated as the situation unfolds.

A 2018 Guide to the EITC

**Please note there are no updates for 2019.

Form W-2s will be arriving in the next couple of weeks and it is important for employers in certain states and locations to be aware of a specific notice requirement regarding the Earned Income Tax Credit (EITC).

What is EITC?

An Earned Income Tax Credit (EITC) is a reduction in the amount of tax an employee owes (or an increase in income tax refunds) and it is available to certain qualified individuals. In some states, employers are required to provide specific notices to inform their employees about the EITC. Here are specific details about each state that carries EITC requirements:

California

California law requires that employers notify their employees of the federal Earned Income Tax Credit (EITC) and the California Earned Income Tax Credit (Cal EITC) by providing a notice within one week of providing the Form W-2. The law states that the notice must be handed or mailed to the employee — it does not include a provision for delivering it electronically. The notice can either provide the language of the notice, or provide information on how to access this information from the IRS and California Franchise Tax Board.

We would recommend creating a notice using the language listed below and passing it out to employees when you pass out their Form W-2s.

Based on your annual earnings, you may be eligible to receive the earned income tax credit from the federal government (federal EITC). The federal EITC is a refundable federal income tax credit for low-income working individuals and families. The federal EITC has no effect on certain welfare benefits. In most cases, federal EITC payments will not be used to determine eligibility for Medicaid, supplemental security income, food stamps, low-income housing, or most temporary assistance for needy families’ payments. Even if you do not owe federal taxes, you must file a federal tax return to receive the federal EITC. Be sure to fill out the federal EITC form in the federal income tax return booklet. For information regarding your eligibility to receive the federal EITC, including information on how to obtain the IRS notice 797 or any other necessary forms and instructions, contact the internal revenue service by calling 1-800-829-3676 or through its web site at www.irs.gov.

 You also may be eligible to receive the California earned income tax credit (California EITC) starting with the calendar year 2015 tax year. The California EITC is a refundable state income tax credit for low-income working individuals and families. The California EITC is treated in the same manner as the federal EITC and generally will not be used to determine eligibility for welfare benefits under California law. To claim the California EITC, even if you do not owe California taxes, you must file a California income tax return and complete and attach the California EITC form (FTB 3514). For information on the availability of the credit, eligibility requirements, and how to obtain the necessary California forms and get help filing, contact the franchise tax board at 1-800-852-5711 or through its web site at www.ftb.ca.gov.

Illinois

Employers must give or mail a notice to employees, regarding the EITC, within one week before or after the Form W-2 is distributed. The following is the language that must be included in this notice:

IF YOU EARNED LESS THAN $39,617 LAST YEAR AND HAVE AT LEAST ONE CHILD, YOU MAY BE ELIGIBLE TO RECEIVE A TAX CREDIT FROM THE FEDERAL GOVERNMENT. THE TAX CREDIT MAY BE A REFUND FROM THE FEDERAL GOVERNMENT FOR AS MUCH AS $3,400. EVEN IF YOU DO NOT OWE FEDERAL TAXES, YOU MUST FILE A TAX RETURN TO RECEIVE THE EARNED INCOME TAX CREDIT. BE SURE TO FILL OUT THE EARNED INCOME TAX CREDIT FORM IN THE TAX RETURN BOOKLET.

Louisiana

Business establishments in Louisiana with 20 or more employees are required to provide a notice at the time of hiring. Here is a link to the required notice.

Maryland

The Maryland Comptroller sends a letter to all Maryland employers at the end of each year which outlines the figures for the EITC eligibility. Employers are then required to send this to all eligible employees on or before December 31st. Here is a sample notice.

New Jersey

Employers are required to provide a notice of the New Jersey Earned Income Tax Credit (NJEITC) to potentially eligible employees between January 1st and February 15th of each year. Here is a link to the notice.

Oregon

Employers in Oregon must provide employees with the ETIC notice at the time that their Form W-2 is given out. A sample notice can be found here.

Philadelphia

Employers must provide Philadelphia residents with the ETIC notice at the time that the Form W-2 is given out. A sample notice can be found here.

Texas

No later than March 1st of each year, employers must notify their employees of the Federal EITC. The notice can be given in person, electronically, through a flyer, or by mail. Employers may use the Federal IRS Notice 797, or they can create a written statement with the same wording.

Virginia

Employers are required to hang the EITC notice with all of the other State and Federal Labor Law posters. Employers can find the required poster here.

If you are a StratEx client, and have any questions about these requirements, please reach out to your HR Account Manager or a StratEx Service Team Member.

What are your EITC obligations?

What is EITC?

eitcAn Earned Income Tax Credit (EITC) is a reduction in the amount of tax an employee owes (or an increase in income tax refunds) and it is available to certain qualified individuals. In some states, employers are required to provide specific notices to inform their employees about the EITC.

Are you aware of the Earned Income Tax Credit Notice requirements for your state or city?
If not, please read below to ensure you are compliant.

Requirements by State or City

California

The California requirement for EITC was communicated directly to our California clients last week. Here is a summary of those requirements.

Illinois

Employers must give or mail a notice regarding the EITC to employees within one week of the W-2 being distributed.  Here is the language that must appear in this notice:

IF YOU EARNED LESS THAN $39,296 LAST YEAR AND HAVE AT LEAST ONE CHILD, YOU MAY BE ELIGIBLE TO RECEIVE A TAX CREDIT FROM THE FEDERAL GOVERNMENT. THE TAX CREDIT MAY BE A REFUND FROM THE FEDERAL GOVERNMENT FOR AS MUCH AS $3,373. EVEN IF YOU DO NOT OWE FEDERAL TAXES, YOU MUST FILE A TAX RETURN TO RECEIVE THE EARNED INCOME TAX CREDIT. BE SURE TO FILL OUT THE EARNED INCOME TAX CREDIT FORM IN THE TAX RETURN BOOKLET.

Maryland

The Maryland Comptroller sends a letter to all Maryland employers at the end of each year which outlines the figures for the EITC eligibility. Employers are then required to send this to all eligible employees before the end of the year. In case you forgot to do that this year, here is a copy of the letter from the Comptroller and the sample notice for employees.

New Jersey

Employers are required to provide a notice of the New Jersey Earned Income Tax Credit (NJEITC) to potentially eligible employees between Jan 1 and Feb 15th each year. Here is a link to the notice.

Louisiana

Business establishments in Louisiana with 20 or more employees are required to provide a notice to employees at the time of hiring. Here is a link to the required notice.

Philadelphia

Employers must provide Philadelphia residents with the ETIC notice at the time that the W2 is given out.  A sample notice (in various languages) can be found here.

Texas

No later than March 1st of each year, employers must notify their employees of the Federal EITC. The notice can be given in person, electronically, through a flyer, or by mail. Employers may use the Federal IRS Notice 797 or they can create a written statement with the same wording.

Virginia

Employers are required to hang the EITC notice with all of the other State and Federal Labor Law posters. Employers can find the required poster here.

If you are a StratEx client and have any questions about these requirements, please reach out to your HR Account Manager or your StratEx Service Team.

Illinois Company Handbook Updates for 2017

Now that we are halfway through the 4th quarter of 2016, it is time to start making changes to your 2017 company handbook. There are a number of Illinois law updates to keep in mind as you make changes.

VESSA

date2017The Victims’ Economic Security and Safety Act (VESSA) was recently amended with changes that will go into effect on January 1, 2017. VESSA provides victims of domestic or sexual violence with unpaid leave to seek medical attention, obtain victim services or counseling, for safety planning, or to seek legal guidance. The existing law gives 8 weeks of unpaid leave to employees who work for an employer with 15-49 employees and 12 weeks of unpaid leave to employees who work for an employer with 50 or more employees. The amendment to the law provides 4 weeks of unpaid leave to employees who work for an employer with 14 or less employees.

For more information on VESSA leave, please visit the IL Department of Labor Website.

Illinois Employee Sick Leave Act (ESLA)

This is a new law that takes effect on January 1, 2017 and affects all employers who provide paid sick or personal time to their employees. This law does not require employers to provide additional paid sick or personal time to employees (not to be confused with the Chicago Paid Sick Leave law) but rather says that if you already provide paid time off to employees to use for their own illness or injury, you must allow them to also use these benefits for the illness, injury or medical appointment of a family member.

The law allows employers to limit the amount of time an employee can use to care for a family member to the amount that they would normally accrue in six months.  The ESLA defines family member as a child, grandchild, spouse (or domestic partner), parent, stepparent, mother or father-in-law and sibling.

Illinois Child Bereavement Leave Act

We sent a communication regarding this law on August 26th, 2016. To read that communication, click here.

Chicago Paid Sick Leave Law

We sent a communication regarding this law on August 12th, 2016. To read that communication, click here.

Illinois Secure Choice Savings Act-  Update

The Illinois Secure Choice Savings Act was signed into legislation in January of 2015 with the intention of being rolled out in 2017. Recently, the Illinois Treasury Department has released information stating that the program will not be rolled out until 2018 or maybe even 2019. This gives employers more time to prepare but it is still something to keep in the back of your mind!

For more information on this program, please visit the Illinois Dept of Treasury Website.

What’s this Health Insurance Marketplace Notice??

If your business has employees, there is a chance you may receive a notice in the mail from the Health Insurance Marketplace. This notice will let you know that you have an employee who submitted an application for health coverage through the ACA Marketplace and they have been determined to be eligible for a premium tax credit.

First: Don’t retaliate

Before we discuss what you need to do, it’s worth knowing that the Affordable Care Act (ACA) contains a non-retaliation provision. So if you receive a notice regarding one of your employees, it is very important to not take any retaliatory action towards that employee.

What does the notice mean for you?

If the employee receives a tax credit and you did not offer the employee affordable health care coverage, your company could be on the hook to pay the Employer Shared Responsibility Penalty to the IRS. If you are unfamiliar with these penalties, you can review this IRS Site for more information. Sample notice:

him_letter

What if you did offer the employee coverage?

If you offered the employee coverage, this is your opportunity to appeal the notice. Here are some helpful hints when submitting an appeal:

  1. Download the Employer Appeal Request Form.
  2. The Marketplace will review appeals based on the following issues:
    a.  Whether or not the employee was offered health coverage that met the “minimum value standard”
    b.  Whether or not the health coverage you offered to the employee was “affordable”
    c.  Whether or not the employee chose to enroll in that health coverage
  3. To complete the appeal, fill out all of the necessary information, provide an explanation of your appeal, and then include supporting documents.
  4. Here is an outline of the documents you could use:

aca_mnotice_chart

What if the employee was not offered coverage because he/she is not a full-time employee?

The Marketplace does not review eligibility based on employment status, but instead defers to the IRS to determine if an employer is subject to the Employer Shared Responsibility Penalty. This information will be reported to the IRS through your 1095-C reports; however, it is still important to make sure you have documentation to support your reason for not offering benefits.

If I win my appeal, does that mean my company will not receive a penalty from the IRS?

The Marketplace cannot determine if an employer owes a Shared Responsibility Penalty, as that determination is made by the IRS. With that being said, if a Marketplace appeal is decided in the employee’s favor, this could prevent the Marketplace from reporting to the IRS that an employer received a credit, or could reduce the period for which the employee was reported as receiving a credit. This process is still so new that we are waiting to learn more about how the IRS will assess and distribute penalties and if there will be an appeal process for employers to utilize.

Need Assistance?

If you are a current StratEx client, and have questions or need assistance with an appeal, you can always reach out to your HR Account Manager. If you are not a current client, contact us for more information on how we can help you work through questions around the ACA, Payroll, Benefits, and HR.

Employee Time Off on Election Day

Ready or not (and aren’t we all ready?), Tuesday, November 8th is Election Day. As the date approaches, it is important to ensure that your company’s Voting Leave Policy is up-to-date and your employees are aware of their rights under the law.

Federal Law protects a citizen’s right to vote, but it is state law that dictates how much time off (if any) an employer is required to give an employee so that they can vote. Now’s the time to review your current Voting Leave Policy to make sure it’s up to snuff. To help with this endeavor, we’ve created a quick list of the laws surrounding this subject for some of the biggest states in the U.S.:

CPeople voting in polling placealifornia

Employees are entitled to take up to two hours without loss of pay to vote if they don’t have sufficient time outside of working hours. The time must be taken at the beginning or the end of a shift and must be requested ahead of time. Employers must post a notice of employees’ rights to take time for voting.

Colorado

With prior notice to an employer, employees may take up to two paid hours off of work for the purpose of voting if they do not have at least 3 hours available to vote outside of their normal working hours. The employer may specify the hours the employee will take off, but the period must fall at the beginning or end of the work period if the employee so requests.

Florida

Employers are prohibited from discharging or threatening to discharge employees who vote in elections. Likewise, employers are prohibited from discharging or threatening to discharge employees who refuse to vote. Some local ordinances provide employees time off without pay to vote on an election day.

Illinois

The State of Illinois grants employees 2 hours of time off to vote if an employee’s working hours on the day of the election begin less than 2 hours after the opening of the polls and end less than 2 hours before the closing of the polls. The employee must request leave prior to election day and the employer may specify the hours in which the employee can be absent.

Massachusetts

Employers must permit voters time off to vote during the period of two hours after the polls open in their district. This law only applies to employees who work in mercantile, manufacturing, or mechanical establishments.

New York

Employees who do not have 4 consecutive non-working hours between polls opening and closing, and who do not have “sufficient” non-working time to vote, are entitled to up to 2 hours paid leave to vote. Employees must request the leave between 2 and 10 days before Election Day. The employer can specify whether it be taken at beginning or end of shift. Employers must post this rule conspicuously 10 business days prior to election.

Texas

Employers are prohibited from knowingly refusing to permit employees to be absent to vote on an election day or penalizing or threatening to penalize employees who go to the polls to vote on election day. The exception to this is when the polls are open for at least two hours outside of the employee’s scheduled working hours.

Wisconsin

Employers must allow employees to be absent to vote in a political election for up to three consecutive hours while the polls are open if they request time off before the election day. Employers may decide the time for the absence and are not entitled to pay non-exempt employees for the time they are absent from work.

Interns: To Pay or Not To Pay

Last year, we warned employers about the risk of hiring unpaid interns. This risk is still a very relevant issue, and more recently, the circuit courts have provided new factors to consider, in addition to the DOL’s existing six factor test.

The new factors, also known as the Primary Beneficiary Test, include seven factors that take a hard look at what the intern receives in exchange for their work. Here are the seven factors of the Primary Beneficiary Test to consider:

  1. The extent to which the intern and the employer understand that there is no expectation of compensation.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

For each factor listed here, fulfilling each to the furthest extent possible would be the safest and most conservative route for employing an unpaid intern without incurring a wage and hour claim. In light of the rulings on recent cases, it is important for employers to keep these factors, as well as the DOL Six Factor Test in mind when implementing internship programs.

iterns

So, before bringing on an UNPAID intern, ask yourself these important questions:

  1. Does the company have the time and resources to supervise and manage this program to ensure that interns are not doing work that is outside of the outlined program?
    • Are your managers well trained and aware of how to supervise interns and manage the program?
  2. Are you providing more training, supervision and structure to the interns than you would to other employees?
  3. Is the company benefiting from the intern?
  4. Is the intern receiving educational experience?
  5. Has the company provided a written agreement outlining the internship arrangement?

But what about a paid intern?

Nervous looking man carrying tray of mugs (Image Source /via Getty Images)

If there are any doubts that your intern program meets the requirements outlined above, the safest route would be to pay your interns (at least minimum wage).  With that being said, there are still some important things to keep in mind with paid interns:

ACA Requirements

{Note: As of May 2017, these ACA requirements still stand, however, changes will likely be coming to these requirements in the future. We will be sure to update our blog when that happens.}

  • When counting employees to determine if you are an ALE (Applicable Large Employer) you must include all employees, including paid interns (unless they are considered seasonal employees). For smaller companies with a large intern program, this could be the difference in having to comply with the ACA’s Pay or Play provisions.
  • Your company will not be considered an ALE if your interns are Seasonal Employees and the following guidelines are met:
    • Your company has 50 Full Time Employees (including equivalents) for 120 days or fewer during a calendar year
    • The employees who are in excess of 50 are Seasonal Employees (interns), who work no more than 120 days in a year and perform services on a seasonal basis
  • Depending on the length of the internship and the “look-back measurement” period that your company has established, you may have to offer benefits to paid interns who are working full time (30 hours per week).

Unemployment

  • While you can set the expectation for the length of the internship, if the paid intern works for you for long enough to meet the eligibility requirements (this would vary by state law) then he/she may be eligible to receive unemployment benefits when the internship ends.

Paid Sick Leave

  • If you are in a state or city that requires Paid Sick Leave, your interns may be eligible depending on their length of employment and number of hours worked.
  • Many states require employers to provide paid sick leave to employees regardless of their classification as full time, part time, intern, etc.

So, as always with HR topics, it’s potentially complicated. If you have any questions as to whether an internship is putting your company at risk, you can contact us for help getting answers.

Happy internship season!

Ready to pay overtime to Exempt Employees? FLSA changes coming soon…

For many employers, upcoming changes to the FLSA rules governing who is exempt vs. non-exempt from overtime (OT) will result in increased payroll costs — either via higher salaries or higher OT. Plan now. Don’t get caught scrambling at the last minute to understand the coming changes and implement a plan — or worse — get caught up in a wage & hour lawsuit because you didn’t properly prepare.

What exactly is changing?

The Department of Labor proposed amendments to increase the salary threshold for the FLSA’s White Collar Exemptions. These proposed amendments include:

  • A new Salary requirement for exempt employees: $970/week ($50,440 annually)
    • Currently the requirement is $455/week ($23,660 annually)
    • This new salary represents the 40th percentile of earnings for all full-time salaried workers throughout the United States
  • A new Salary requirement for “highly-compensated” employees: $125,148 annually (which is tied to the 90th salary percentile)
    • Currently the requirement is $100,000 annually
  • Automatic annual updates to the salary requirement amounts which will be in line with the applicable 40% or 90% thresholds

We recommend reviewing this DOL Fact Sheet on the proposed rule for a thorough overview.

When is this happening?

The comment period has officially been closed. The Final Rule could be published in or before July 2016 and the details of the rule will take effect at least 60 days later.

What do you, as an employer, need to do?

  • Determine which (if any) of your employees may be affected by the new salary requirements (if you are a StratEx client, you can use the Report Creator to run a custom report)
  • Review the average number of hours worked by these employees
  • Analyze the cost of either increasing salaries or paying overtime to comply with the new salary basis rule
  • Reach out to your StratEx HR Account Manager to discuss how the proposed changes might affect your company
  • Update position’s Job Description if it is changing its’ exempt vs. non-exempt status

By following these steps (soon!), your company can be fully prepared to act when these changes to the FLSA law go into effect.