Saver's Credit Can Spur Retirement Plan Contributions
Many employees are not aware of employer-sponsored retirement accounts, or individual retirement accounts (IRA), which could be costing those more money. Tax season is the best time for employers to educate their employees on how they can earn extra tax credits through their 401(k) plans. Read this blog post to learn more about how to educate employees on what retirement account opportunities that are available to them.
Many workers don't know that they're eligible for a tax credit by saving in an employer-sponsored retirement plan or individual retirement account (IRA)—and that could be costing them money. Tax time, however, is prime time for employers to inform eligible workers about the saver's credit.
The Retirement Savings Contributions Credit, or saver's credit, is available to low- and moderate-income workers who are putting money aside for retirement. But only 29 percent of workers with annual household income below $50,000 know about the saver's credit, according to the nonprofit Transamerica Center for Retirement Studies in Los Angeles, which surveyed nearly 6,000 employees last fall.
"Tax season is an ideal time to tell eligible workers how they can earn extra tax credits by saving through their employer's 401(k) or a similar retirement plan," said Catherine Collinson, president of the Transamerica Center. "The saver's credit might just be the motivator for those not yet saving for retirement to get started."
Scott Spann, a senior financial planner with Financial Finesse, a provider of workplace financial wellness programs in Charleston, S.C., said, "Saving for retirement is a challenge for many households in America. Special tax incentives help make the process of saving easier."
What Is the Saver's Credit?
Like other tax credits, the saver's credit can increase a taxpayer's refund or reduce the tax owed. Here's how it works:
The amount of the credit is a maximum of 50 percent of an employee's retirement plan contributions up to $2,000 (or $4,000 for married couples filing jointly), depending on the filer's adjusted gross income as reported on Form 1040. Consequently, the maximum saver's credit is $1,000 (or $2,000 for married couples filing jointly).
The saver's credit "is different than a tax deduction due to the fact that a tax credit is a dollar-for-dollar reduction of your gross tax liability, which is the total amount of taxes you're responsible for paying before any credits are applied," Spann explained.
The saver's credit also differs from the separate tax benefit of contributing pretax dollars to a qualified retirement plan, such as an employer-sponsored 401(k) or an IRA. "Many eligible retirement savers may be confusing these two incentives because the notion of a double tax benefit"—pretax contributions and an additional tax credit—"seems too good to be true," Collinson said.
Who Can Claim the Saver's Credit?
The credit is available to workers age 18 or older who have contributed to a company-sponsored retirement plan or an IRA in the past year and meet the income requirements shown in the table below. The filer cannot be a full-time student nor claimed as a dependent on another person's tax return.
Income Caps for Tax Years 2019 and 2020
For eligible workers, the amount of the available tax credit diminishes as adjusted gross income (AGI) rises. To help preserve the credit's value, income thresholds are adjusted annually to keep pace with inflation. Below are the AGI caps for tax year 2019 (for tax returns filed this year) and 2020 (for returns filed next year).
| 2019 Saver's Credit | |||
| Tax Credit Rate | Single Filers and Married, Filing Separately* | Married, Filing Jointly | Heads of Household |
| 50% of contribution | AGI not more than - $19,250 | AGI not more than $38,500 | AGI not more than $28,875 |
| 20% of contribution | AGI of $19,251 - $20,750 | AGI of $38,501 - $41,500 | AGI of $28,876 - $31,125 |
| 10% of contribution | AGI of $20,751- $32,000 | AGI of $41,501 - $64,000 | AGI of $31,126 - $48,000 |
| No credit | AGI more than $32,000 | AGI more than $64,000 | AGI more than $48,000 |
| 2020 Saver's Credit | |||
| Tax Credit Rate | Single Filers and Married, Filing Separately* | Married, Filing Jointly | Heads of Household |
| 50% of contribution | AGI not more than $19,500 | AGI not more than $39,000 | AGI not more than $29,250 |
| 20% of contribution | AGI of $19,501 - $21,250 | AGI of $39,001 - $42,500 | AGI of $29,251 - $31,875 |
| 10% of contribution | AGI of $21,251 - $32,500 | AGI of $42,501 - $65,000 | AGI of $31,876 - $48,750 |
| No credit | AGI more than $32,500 | AGI more than $65,000 | AGI more than $48,750 |
Deadlines for Retirement Contributions
"You must make eligible contributions to your employer-sponsored retirement plan or IRA for the tax year for which you are claiming the income tax credit," Spann said.
While 401(k) contributions for a tax year can be made only up to Dec. 31, those who are eligible but did not save last year can still make a tax year 2019 IRA contribution until April 15, 2020.
Filing for the Saver's Credit
Employers can advise eligible workers to take the following steps to claim the saver's credit, according to the Transamerica Center:
- If using tax-preparation software, including those programs offered through the IRS Free File program, use Form 1040 or Form 1040NR for nonresident aliens. Answer questions about the saver's credit, which may be referred to as the Retirement Savings Contributions Credit or the Credit for Qualified Retirement Savings Contributions.
- If preparing tax returns manually, complete Form 8880, Credit for Qualified Retirement Savings Contributions, to determine your exact credit rate and amount. Then transfer the amount to the designated line on Form 1040 (Schedule 3) or Form 1040NR.
- If using a professional tax preparer, ask about the saver's credit.
Financial planners advise having tax refunds directly deposited into an IRA to further boost your retirement savings.
The Transamerica Center has additional information, in English and Spanish, on its Saver's Credit webpage, along with a downloadable fact sheet.
IRS Free File Program Is Available
Another potentially overlooked opportunity for workers is the IRS Free File program, which offers federal income tax preparation software at no charge to tax filers with an AGI of $69,000 or less.
Free File opened on Jan. 10, 2020, for the preparation of 2019 tax returns. Eligible taxpayers can do their taxes now, and the Free File provider will submit the return once the IRS officially opens the tax filing season on Jan. 27.
For 2020, the Free File partners are: 1040Now, Inc., ezTaxReturn.com (English and Spanish), FileYourTaxes.com, Free tax Returns.com, H&R Block, Intuit, On-Line Taxes, Inc., Tax ACT, TaxHawk, Inc. and TaxSlayer (English and Spanish).
Here's how Free File works:
- Taxpayers go to IRS.gov/FreeFile to see all Free File options.
- They browse each of the offers or use a "look up" tool to help find the right product. Each Free File partner sets its own eligibility standards generally based on income, age and state residency. But if the taxpayer's adjusted gross income was $69,000 or less, they will find at least one free product to use.
- They select a provider and follow the links to their web page to begin a tax return.
- They complete and e-File a tax return if they have all the income and deduction records they need. The fastest way to get a refund is by filing electronically and selecting direct deposit. For taxes owed, they can use direct pay or electronic options.
Many Free File online products also offer free state tax preparation, although some charge a state fee. Taxpayers should read each provider's information carefully.
"The IRS has worked to improve the program for this year, and we encourage taxpayers to visit IRS.gov, and consider using the Free File option to get a head start on tax season," said IRS Commissioner Chuck Rettig.
Nearly 57 million returns have been filed through the Free File program since it began in 2003, and 70 percent of U.S. taxpayers (about 100 million people) are eligible for Free File, according to the IRS.
SOURCE: Miller, S. (10 January 2020) "Saver's Credit Can Spur Retirement Plan Contributions" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/remind-low-wage-earners-about-savers-credit.aspx
Putting Humanity into HR Compliance: 3 Steps to Active Listening
How is your HR department communicating with your employees? One of the most common complaints people hear about HR professionals is that they don't listen. Read this blog post from SHRM for three practices of active listening.
When I work with executives and managers, a common complaint I hear about HR professionals is "They don't listen. They just tell."
So when I work with HR professionals, I encourage them to adopt three practices of active listening:
- The period-to-question-mark ratio.
- The EAAR listening method.
- Confront, then question.
The Period-to-Question-Mark Ratio
When you're engaged in a conversation, what's the ratio of your sentences that end with periods to those that end with question marks? If you're like most people, the ratio is overwhelmingly tilted toward sentences that end with periods. This could show that you are telling people what to do more often than you are looking for consensus on how to solve a problem. When you engage in a discussion with an executive, manager or employee, keep the ratio in mind. Strive to correct the imbalance by making yourself ask questions. The fact that you ask matters more than what the question is.
People I've coached have found that keeping the ratio in mind acts as a self-regulating device to ask more questions.
The EAAR Listening Method
E: Explore
A: Acknowledge
A: Apply
R: Response
It's a sequence. Begin the discussion with an exploratory, open-ended question: "Ms. Manager, what are the reasons that led you to conclude Mr. Employee should be fired?" "Tell me more." "Please share some examples." "Help me understand."
Once you've explored the other person's position and reasons for it, move to acknowledgment. Get the person to acknowledge that you understand his or her point. "So, Ms. Manager, if I understand you correctly, you believe Mr. Employee should be terminated because of the following reasons… Is that correct?
Although critical, the acknowledge step is often overlooked. Instead of confirming the understanding, the listener makes an assumption, which often proves erroneous and leads to unnecessary conflict. The EAAR method eliminates this possibility. If the person says, "No, that's not my position," simply go back to the exploration step: "I'm sorry. Please explain what I missed."
In your response, apply portions of what the person said, even actual words the person used. Even if your response isn't substantively what the person originally sought, this approach creates optimal conditions for acceptance.
"Ms. Manager, I agree with you that Mr. Employee's behavior is unacceptable. What you described [list the employee's actions] makes a compelling case. However, because of the following reasons, I think termination now would be premature and present undue legal risk.
"Nevertheless, I'm happy to work with you on an intervention strategy. If Mr. Employee is willing and able to close the gap in your legitimate management expectations, he will do so. If not, we will be in a much stronger position to terminate his employment, and I will support you."
Many HR professionals have told me that when they've used the EAAR method, conversations they feared would turn ugly became positive. Instead of a clash of wills and arguments, the discussion became collaborative and solution-oriented.
Confront, Then Question
What if you are the bearer of bad news? You must deliver a message you know won't make the recipient happy.
The approach here is to confront, then question. Make a short opening statement. State your position succinctly and without elaboration. Next, switch to question mode.
You can think of this approach as beginning the EAAR method with a short opening response to frame the conversation.
"Mr. Executive, based on our investigation, we found that Mr. Employee in your department engaged in actions that violate our anti-harassment policy. Although we understand he has been with the company for a long time and is one of your best performers, given the seriousness of the misconduct, we believe the appropriate action is termination of his employment."
Next, go to question mode: "What do you think?" "What questions do you have?" "How do you see things at this point?"
Assuming the executive doesn't respond by saying "Great idea! Go for it!" and wants to argue his or her point, pivot to exploration and start the EAAR process at that point. "I want to make sure I understand you, so please tell me what you agree with, what you disagree with and your reasons."
After that comes your acknowledgment: "Let me make sure I understand you. You agree that Mr. Employee's behavior was unacceptable and violated policy. However, you disagree that the proper remedy is termination. Instead, you recommend a suspension and written warning for these reasons. [List the reasons.] Is that accurate?"
Now you're ready to apply. From what the executive said, extract what you can use in your response.
"I appreciate the fact that you support our investigation and finding of misconduct. Our only disagreement is the appropriate remedy. Your points about Mr. Employee's long service and stellar performance are valid. Yet for these reasons [list them], I still believe termination is called for. How do you suggest we resolve our differing views? For example, should we present them to the CEO and let her decide?"
These types of conversations can go in all sorts of directions, including ones you don't anticipate. That's OK, so long as you don't lose sight of the value of questions during a dispute.
Avoid cross-examination questions, such as "Isn't it true that … ?" Your questions should not state or imply your view. They should be curiosity-based, as you're genuinely trying to find out what the other person thinks.
The confront-then-question approach allows you to go directly to the heart of the matter. Even if you sense rising tension and hostility, the negative emotions will soon be arrested by your open-ended, exploratory questions.
When HR professionals make a commitment to active listening, executives, managers and employees become their biggest fans instead of being their biggest critics.
SOURCE: Janove, J. (9 October 2019) "Putting Humanity into HR Compliance: 3 Steps to Active Listening" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/putting-humanity-into-hr-compliance-active-listening-.aspx
U.S. Jobs Increase by 130,000 in August
According to a recent report from the Bureau of Labor Statistics (BLS), U.S. employers added 130,000 jobs this past August and the unemployment rate stayed unchanged at 3.7 percent for the third month in a row. Read this article from SHRM to learn more.
U.S. employers added 130,000 jobs in August, coming in below economists' expectations, and the unemployment rate held at 3.7 percent for the third straight month, according to the latest Bureau of Labor Statistics (BLS) report.
July's employment total was revised down from 164,000 new jobs to 159,000. In the past three months, job gains averaged 156,000 a month after revisions.
"Today's jobs report shows slowing private-sector job growth and slowing wage growth, which—while expected this late in the recovery—is somewhat disappointing after the rapid gains of the past two years," said Julia Pollak, a labor economist at employment marketplace ZipRecruiter.
On Sept. 5, the ADP Research Institute and Moody's Analytics reported private-sector growth of 195,000 new jobs, better than economists' expectations of about 160,000 jobs.
"Despite the slower growth in jobs added, labor force participation did perk up, a sign that the healthy labor market is still drawing in workers from the sidelines," said Glassdoor senior economist Daniel Zhao.
The labor force participation rate—which includes people who are working and those looking for work—ticked up to 63.2 percent, one of its highest readings in years. The proportion of the population currently employed is at 60.9 percent, its highest point since December 2008. And the employment-to-population ratio for workers aged 25-54 reached 80 percent for the first time since January 2008.
Zhao said that the increases signal that the tightness of the labor market is putting upward pressure on labor force participation despite an aging population pulling it down.
Michael Stull, senior vice president at the staffing and recruiting firm Manpower North America, said other positive takeaways from the report are better than expected wage growth and strong hiring in the professional and business, financial and health care sectors.
Job gains in August were led by professional and business services (37,000 new jobs), which includes many technology jobs and the nation's booming health care industry (23,900). Other industries showing gains include finance (15,000) and construction (14,000).
"Health care and professional services have both grown strongly across 2019, carrying the labor market despite weakness in the goods-producing sectors," Zhao said. "Additionally, the increase in temporary help services [15,400 jobs] is a good sign that employers are not cutting back on the most flexible parts of their workforces in the face of recession chatter."
However, Pollak noted that the BLS reported that the private sector only added 96,000 jobs, marking a slowdown from the pace of job growth over the last two years.
Industries like mining and manufacturing are struggling. Mining employment fell by 5,600 jobs and manufacturers have seen a marked slowdown in job creation, with only 3,000 jobs added in August. "In 2018, manufacturing job growth exceeded 10,000 jobs in 11 of 12 months, but this year job growth has been below 10,000 or even negative in six of eight months," Pollak said. "Trade policy uncertainty and a global manufacturing slowdown seem to have brought the 2017-2018 manufacturing boom to a halt."
The retail sector lost 11,000 jobs in August, continuing a trend of month-over-month declines for the seventh consecutive month. "Despite strong consumer spending, increasing labor costs and the rise of e-commerce are keeping retail hiring down even as we begin to enter the holiday hiring season," Zhao said. "We'll be watching the next few reports for signs that the holiday retail hiring season has slowed or that the latest round of tariffs are having a larger effect on the retail industry."
Juiced by Census Hires
U.S. jobs data is now—and will for some time be—inflated by a temporary spike in government hiring for 2020 Census workers. The federal government added 28,000 workers (excluding U.S. Post Office hires) to its payrolls in August. The majority of those—25,000 temporary workers—will go door-to-door over the next several weeks to verify addresses ahead of the 2020 count.
The Census Bureau expects to hire about 40,000 people for this preliminary duty and about 500,000 workers next year for the actual canvassing.
Unemployment Stays Low
The BLS data showed that the national unemployment rate remained below 4 percent for the 18th consecutive month. The number of unemployed people held at 6 million.
"The unemployment rate remains near its lowest level in 50 years, again signaling the strength of the labor market for workers as the number of job openings continues to exceed the number of unemployed workers," Zhao said.
The number of long-term unemployed (those jobless for 27 weeks or more) rose from 1.1 million to 1.2 million in August and accounted for 20.6 percent of the unemployed.
The U-6 unemployment rate—a broader measure capturing both the unemployed, underemployed and those too discouraged to seek work—continued its long decline and held at 7.3 percent for the second month in a row. There were 467,000 discouraged workers in August, about the same as a year ago.
"There are still more discouraged workers than we would expect, given the low unemployment rate," Pollak said. "Discouraged workers are those who are out of work but have not applied for a job in the past four weeks because they think there are none available or none for which they qualify," she explained. "If there were fewer discouraged workers, labor force participation and employment rates would be higher, and more vacancies would be filled."
Wages Inch Up
Average hourly earnings increased 11 cents to $28.11, following 9-cent gains in both June and July. Over the past 12 months, average hourly earnings have increased by 3.2 percent.
"At this point in the expansion, we'd expect wage growth to pick up, but it is continuing to stall," said Nick Bunker, a Washington, D.C.-based economist at the Indeed Hiring Lab. "Wage growth continues to be strongest for workers in lower-wage industries."
SOURCE: Maurer, R. (06 September 2019) "US Jobs increase by 130,000 in August" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/bls-hr-jobs-unemployment-august-2019.aspx
Creating High-Performance Teams
Can having a plan for more than the hiring process help both future employees and current? Having a high-performance team is essential in creating strong work environments. Continue reading this blog post from SHRM to learn more about creating high-performance teams at your organization.
Every organization needs its teams to deliver a high level of performance to succeed in today’s business environment. Author Omar L. Harris offers clear guidance on how to hire for, support, and guide high-performance teams.
What are some tips to hiring employees to fit into high-performing teams?
My top tip for hiring employees to fit into high-performing teams is to understand the key mix of attributes that the high-performing team members possess. Look beyond IQ and pedigree and focus on more attitudinal attributes such as work ethic, passion, solution-orientation, and the maturity to productively manage disappointment and conflict.
What are the stages of forming a high-performance team?
The stages are:
- hiring the right W.H.O.M. (work ethic, heart, optimism, maturity),
- effectively onboarding each team member by getting to know them on a deeper level,
- helping them accelerate their learning curve,
- setting clear expectations of their roles,
- building trust between the team members by encouraging vulnerability and open dialogue, and
- crafting a clear mission with superordinate goals that bring the team together to achieve something that no one could achieve on their own.
What are the hallmarks of a high-performing team?
One hallmark of a high-performing team is a level of professional intimacy among the team members, meaning they know each other well both as professionals and as people and enjoy working together. A level of transparency and passion for the work being done that leads to productive conflicts resulting in better decision-making. An adherence to norms that define how every member works together. And an absolute focus on delivering results. The characteristics that make this happen are simply people who work hard, have shared passion, search for solutions with a sense of urgency, and have the maturity to overcome inevitable conflicts and disappointments.
How can senior leadership create a culture of strong teams?
Focus on creating a team of managers who love achieving results by putting their people in their strengths zones and developing their capacity and talents.
Do high-performance teams vary across companies, industries, or geographies?
I've had the opportunity to lead teams across the world in the U.S., Middle East, Asia, and Latin America, and people are the same all around the world. People want to be valued. They want to believe in the mission of their organization. They want to have opportunities to develop. So leaders who want to create high-performance teams anywhere in the world need to be able to tap into these commonalities and work tirelessly to create the condition for the success of their people.
How can leaders help struggling teams?
First understand the source of the struggle. Most issues occur during the team formation and team storming stages. And then level-up their own leadership skills to respond to the challenges of the moment. The best advice I can give is to look to deepen the understanding and connection with each member of the team and by improving each members focus and alignment, you improve the team dynamic by default. Lastly, recognize if the ingredients are off and make the necessary decisions to move poisonous people out of the environment.
What are other things to remember about managing high-performance teams?
Performance is relative and the goal posts must be continually stretched to keep everyone engaged. Also, plan for succession so as people on the team achieve results and receive greater opportunities, the next generation of team members are ready to step up and continue on the mission.
A 55-year-old intern? Why older apprentices may be the answer to the talent gap
Recently, the DOL’s Task Force on Apprenticeship Expansion called for a process that would establish industry-recognized apprenticeship programs (IRAPs). Below, this blog post discusses how older apprentices may be the answer to today's talent gap.
LAS VEGAS — Want to revitalize your workforce? Try hiring a baby boomer as your new intern.
Apprentice programs may not be just for young talents fresh out of college. Employers should study such programs for older workers, said the leader of the world’s largest HR professional society.
“We oftentimes think about apprenticeships for young people, but what about the 55-year-old who needs to work or wants to work an additional 20 years and needs to learn the new coding language?” Johnny Taylor Jr., CEO of the Society for Human Resource Management, said Tuesday during a media event at the annual SHRM conference. “So apprenticeship writ large ... it’s a broader idea than just what we all think about young people getting an opportunity.”
The comments come after the DOL’s Task Force on Apprenticeship Expansion on Monday called for a process to establish industry-recognized apprenticeship programs (IRAPs).
IRAPs will be customizable apprenticeship models that the DOL calls "a new pathway for the expansion of apprenticeships."
In addition, the proposed rule outlined the process to become a standards recognition entity (SRE), which would set standards for training, structure and curriculum for the IRAPs.
DOL would ensure that SREs have the capacity and quality-assurance processes and procedures needed to monitor IRAPs and recognize that IRAPs are high quality. The department's criteria for high-quality IRAPs include: paid work, work-based learning, mentorship, education and instruction, industry-recognized credentials, safety and supervision and adhering to equal employment opportunity obligations.
"The apprenticeship model of earning while learning has worked well in many American industries, and today we open opportunities for apprenticeships to flourish in new sectors of our economy," Labor Secretary Alexander Acosta said in a statement.
Taylor has addressed expanding apprenticeships before, noting the association has recently renewed its support by studying ways to make programs more inclusive and broaden them beyond high school or college students, he said.
“I was at a meeting the other day and they referred to restoring the dignity of the first job,” Taylor said. “That’s a real aspirational thing.”
Employers also need to do more to tap hidden pools of skilled labor from the disabled to the formerly incarcerated to bridge the workplace talent gap in the United States, he said.
“How do we do that? For example, instead of a four-year college experience, maybe it’s a six-year average college experience because you go knock out your first two years,” and break up subsequent educational experiences between semesters of work, school or a mix of both combined with work internships.
The former labor employment lawyer also said key themes that SHRM is focused on this year include workplace culture, age discrimination, diversity and reskilling the U.S. workforce for the jobs of the future.
“Everyone is talking about work,” Taylor said. “It’s a great time to be in HR.”
Additional reporting by Nick Otto.
SOURCE: Siew, W. (26 June 2019) "A 55-year-old intern? Why older apprentices may be the answer to the talent gap" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/shrm-calls-on-expanding-workforce-apprenticeships
IRS Seeks Comments on Form W-4 Overhaul for 2020
A draft of the 2020 Form W-4 was released on May 31, by the IRS. This new version includes included major revisions that were designed to make accurate income-tax withholding easier for employees. Continue reading this blog post to learn more.
On May 31, the IRS released a draft 2020 Form W-4 with major revisions designed to make accurate income-tax withholding easier for employees, starting next year. The IRS also posted FAQs about the new form and asked for comments on the changes by July 1.
The form is not for immediate use, the IRS emphasized, and employers should continue to use the current Form W-4 for 2019.
"The primary goals of the new design are to provide simplicity, accuracy and privacy for employees, while minimizing burden for employers and payroll processors," IRS Commissioner Charles Rettig said.
The new form reflects changes made by the Tax Cuts and Jobs Act, which took effect last year. For instance, the revised form eliminates the use of withholding allowances, which were tied to the personal exemption amount—$4,050 for 2017, now suspended. It also replaces complicated worksheets with more straightforward questions.
Addressing a key employer concern, the IRS said that employees who have submitted Form W-4 in any year before 2020 will not need to submit a new form because of the redesign. Employers can compute withholding based on information from employees' most recently submitted Form W-4, if employees choose not to adjust their withholding using the revised form.
Easier for Employees, More Complex for Employers
"Generally, the new Form W-4 is an improvement for employees," said Pete Isberg, vice president of government relations at payroll and HR services firm ADP. It shifts the burden of several calculations from employees to the employer, he noted. "For example, previously. employees would complete a difficult worksheet to convert expected deductions to a number of withholding allowances. With the new form, they'll just enter their full-year expected deductions over the standard deduction amount."
Because existing employees won't have to complete a new Form W-4, "employers must still observe their current Form W-4 withholding allowances," Isberg said. "However, for employees hired after 2019—and anyone that wants to adjust their withholding after 2019—the 2020 version will be the only valid Form W-4."
Not requiring employees to submit the new W-4 will ease HR's burden, but it also means that "payroll systems will need to accommodate the existing withholding allowance calculation, as well as the new method," which could make reprogramming payroll systems more arduous, said Mike Trabold, director of compliance at Paychex, an HR technology services and payroll provider.
In addition to supporting two distinct withholding systems, employers will need to accommodate three sets of withholding calculations, Isberg said:
- The old system based on withholding allowances.
- The 2020 system with a checkbox for optional higher withholding.
- The 2020 system that allows employees to input new data, listed below in the W-4 forms comparison chart.
| 2019 Form W-4 | 2020 Form W-4 (draft) |
| Number of withholding allowances. | Checkbox for multiple jobs or optional higher withholding. |
| Per-payroll additional amount to withhold. | Full-year child and dependent tax credits. |
| Full-year other (non-wage) income. | |
| Full-year deductions (over the standard deduction amount). | |
| Per-payroll additional amount to withhold. |
"One interesting question is how long employers might need to support the old and new systems simultaneously," Isberg said. "It will probably be many years before the last withholding allowances [used by current employees] drop off."
Addressing Privacy Concerns
In June 2018, the IRS issued an earlier revision of Form W-4 and instructions for 2019. But in September 2018, the IRS said it would delay major revisions until 2020 to respond to criticism about the form's release date and complexity.
"We anticipate this version will be better received than the prior draft," Trabold said. The earlier version "asked for much more specific information on other sources of income, such as second jobs, spousal income, non-earned income, etc., which was intended to increase withholding accuracy but which many taxpayers may have felt to be invasive and wouldn't necessarily want to share with their employer."
With the new version of the form, taxpayers can check a box "to indicate their desire to have more tax withheld, without having to share details with their employer," Trabold said. Although this may lead to too much withholding for some taxpayers, "it will help address concerns of those who prefer to get a refund check every year or who may have had to unexpectedly pay tax when filing this year," he explained.
While there will be a worksheet to help taxpayers with the new form, "it will not be provided to the employer, further assuring privacy," Trabold noted.
What's Next
The IRS said it plans to release a "close to final" version of the form in late July, after which employers and payroll administrators can start making programming changes to their systems. A final version, expected in November, will contain only minor adjustments.
The IRS also plans to release instructions for employers in the next few weeks for comment.
In the meantime, the IRS encouraged employees to use its online Paycheck Checkup tool to ensure they're having the right amount of tax withheld. While useful in its current form, the tool will be updated to reflect the new W-4 when it becomes final.
SOURCE: Miller, S. (6 June 2019) "IRS Seeks Comments on Form W-4 Overhaul for 2020" (Web Blog Post). Retrieved from https://www.shrm.org/ResourcesAndTools/hr-topics/compensation/Pages/IRS-seeks-comments-on-Form-W-4-overhaul-for-2020.aspx
Changes are coming to paid leave. Here’s what employers should know
Many states and local governments are enacting their own paid leave policies, making it difficult for employers to navigate employee paid leave. Read this blog post for what employers should know about the coming changes for paid leave.
A growing number of states and local governments are enacting their own paid leave policies. These new changes can be difficult for employers to navigate if they don’t understand the changes that are happening.
Adding to the confusion among employers, paid sick leave and paid family leave are often used interchangeably, when in fact there are some important distinctions. Paid sick leave is for a shorter time frame than paid family leave and allows eligible employees to care for their own or a family member’s health or preventative care. Paid family leave is more extensive and allows eligible employees to care for their own or a family member’s serious health condition, bond with a new child or to relieve family pressures when someone is called to military service.
The best-known type of employee leave is job-protected leave under the Family Medical Leave Act, where employees can request to take family medical leave for their own or a loved one’s illness, or for military caregiver leave. However, leave under FMLA is unpaid, and in most cases, employees may use available PTO or paid leave time in conjunction with family medical leave.
Rules vary by state, which makes it more difficult for multi-state employers to comply. The following is an overview of some new and changing state and local paid leave laws.
Paid sick leave
The states that currently have paid sick leave laws in place are Arizona, California, Connecticut, Maryland, Massachusetts, New Jersey, Oregon, Rhode Island, Vermont and Washington. There are also numerous local and city laws coming into effect across the country.
In New Jersey, the Paid Sick Leave Act was enacted late last year. It applies to all New Jersey businesses regardless of size; however, public employees, per diem healthcare employees and construction workers employed pursuant to a collective bargaining agreement are exempt. As of February 26, New Jersey employees could begin using accrued leave time, and employees who started after the law was enacted are eligible to begin using accrued leave 120 days after their hire dates.
Michigan’s Paid Medical Leave Act requires employers with 50 or more employees to provide paid leave for personal or family needs as of March.
Under Vermont’s paid sick leave law, this January, the number of paid sick leave hours employees may accrue rose from 24 to 40 hours per year.
In San Antonio, a local paid sick leave ordinance passed last year, but it may not take effect this August. The ordinance mirrors one passed in Austin that has been derailed by legal challenges from the state. Employers in these cities should watch these, closely.
Paid family leave
The five states that currently have paid family leave policies are California, New Jersey, Rhode Island, New York, Washington and the District of Columbia.
New York, Washington and D.C. all have updates coming to their existing legislation, and Massachusetts will launch a new paid family program for employers in that state. In New York, the state’s paid family leave program went into effect in 2018 and included up to eight weeks of paid family leave for covered employees. This year, the paid leave time jumps to 10 weeks. Payroll deductions to fund the program also increased.
Washington’s paid family leave program will begin on January 1, 2020, but withholding for the program started on January 1 of this year. The program will include 12 weeks of paid family leave, 12 weeks of paid medical leave. If employees face multiple events in a year, they may be receive up to 16 weeks, and up to 18 weeks if they experience complications during pregnancy.
The paid family leave program in Massachusetts launches on January 1, 2021, with up to 12 weeks of paid leave to care for a family member or new child, 20 weeks of paid leave for personal medical issues and 26 weeks of leave for an emergency related to a family member’s military deployment. Payroll deductions for the program start on July 1.
The Paid Leave Act of Washington, D.C. will launch next year with eight weeks of parental leave to bond with a new child, six weeks of leave to care for an ill family member with a serious health condition and two weeks of medical leave to care for one’s own serious health condition. On July 1, the district will begin collecting taxes from employers, and paid leave benefits will be administered as of July 1, 2020.
Challenging times ahead
An employer must comply with all state and local sick and family leave laws, and ignorance of a law is not a defense. Employers must navigate different state guidelines and requirements for eligibility no matter how complex, including multi-state employers and companies with employees working remotely in different jurisdictions.
These state paid leave programs are funded by taxes, but employers must cover the costs of managing the work of employees who are out on leave. While generous paid leave policies can help employers attract talent, they simply don’t make sense for all companies. For example, it can be difficult for low-margin businesses to manage their workforces effectively when employees can take an extended paid leave.
Not only must employers ensure compliance with state and local rules, but they also must make sure that their sick time, family and parental leave policies are non-discriminatory and consistent with federal laws and regulations. That’s a lot to administer.
Employers should expect to see the changes in paid sick leave and family leave laws to continue. In the meantime, companies should make sure they have the people and internal processes in place right now to track these changes and ensure compliance across the board.
SOURCE: Starkman, J.; Johnson, D. (2 May 2019) "Changes are coming to paid leave. Here’s what employers should know" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/what-employers-need-to-know-about-changing-paid-leave-laws?brief=00000152-14a7-d1cc-a5fa-7cffccf00000
Employers Must Report 2017 and 2018 EEO-1 Pay Data
The Equal Employment Opportunity Commission (EEOC) is requiring that all employers report their pay data, broken down by race, sex and ethnicity, from 2017 and 2018 by September 30. Continue reading this post from the SHRM to learn more.
The Equal Employment Opportunity Commission (EEOC) has announced that employers must report pay data, broken down by race, sex and ethnicity, from 2017 and 2018 payrolls. The pay data reports are due Sept. 30.
Employers had been waiting to learn what pay data they would need to file—if any at all—as litigation on the matter ensued. A federal judge initially ordered the EEOC to collect employee pay data for 2018. The National Women's Law Center (NWLC) and other plaintiffs wanted the EEOC to collect two years of data, as the agency was supposed to under a new regulation before the government halted the collection in 2017.
Judge Tanya Chutkan of the U.S. District Court for the District of Columbia sided with the plaintiffs and gave the EEOC the option of collecting 2017 pay data along with the 2018 information by the Sept. 30 deadline or collecting 2019 pay data during the 2020 reporting period. The EEOC opted to collect the 2017 data.
The agency said it could make the collection portal available to employers by mid-July and would provide information and training to employers prior to that date.
Immediate Steps
"We are awaiting confirmation from the EEOC or the contractor it is hiring to facilitate the pay-data collection on how to lay out the data file for a batch upload," said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va.
But employers should take some steps immediately. They should reach out to their subject-matter and technical experts and pull together resources to ensure that the required data components can be captured, analyzed and reported by Sept. 30, said Annette Tyman, an attorney with Seyfarth Shaw in Chicago.
Filing the additional reports will impose unanticipated burdens for HR, IT and legal departments, as well as third-party consultants, she noted. "It is unclear whether any further litigation options will impact the Sept. 30 deadline, and we are instructing employers to assume they must comply."
Employers should keep in mind that they still must submit their 2018 data for Component 1 of the EEO-1 form by May 31, unless they request an extension. Note that the EEOC recently shortened the extension period for employers to report Component 1 data from 30 days to two weeks. So the extension deadline is now June 14.
Component 1 asks for the number of employees who work for the business by job category, race, ethnicity and sex. Component 2 data—which includes hours worked and pay information from employees' W-2 forms by race, ethnicity and sex—is the subject of the legal dispute.
Data Collection
Businesses with at least 100 employees and federal contractors with at least 50 employees and a contract with the federal government of $50,000 or more must file the EEO-1 form. The EEOC uses information about the number of women and minorities companies employ to support civil rights enforcement and analyze employment patterns, according to the agency.
The revised EEO-1 form will require employers to report wage information from Box 1 of the W-2 form and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands.
The reported hours worked should show actual hours worked by nonexempt employees and an estimated 20 hours per week for part-time exempt employees and 40 hours per week for full-time exempt employees.
"Filling out the added data in the EEO-1 form will present a large amount of work, especially as there's great potential for human error when populating the significantly expanded form," said Arthur Tacchino, J.D., chief innovation officer at SyncStream Solutions, which provides workplace compliance solutions.
Employers should start looking at their data now and conduct an initial assessment of their systems, said Camille Olson, an attorney with Seyfarth Shaw in Chicago. Identify the systems that house the relevant demographic, pay and hours-worked data and determine how to pull the information together, she said.
Pulling EEO-1 data is much simpler for Component 1, she noted, because it only involves reporting the employer's headcount by race, ethnicity and sex—whereas collecting pay information involves more data points. Additionally, employers may use different vendor systems at different locations, some employees may have only worked for part of the year, and other employees may have been reclassified to exempt or nonexempt.
"Employers may want to inquire with their current vendors—payroll or otherwise—or look for outside vendors that may be able to assist them with this reporting requirement," Tacchino said.
Under some circumstances, employers may be able to seek an exemption (at the EEOC's discretion) if filing the information would cause an undue burden. "Mega employers" may not be able to show an undue burden, but this could be an option for smaller businesses, said Jim Paretti, an attorney with Littler in Washington, D.C. But that will depend on how the parties decide to move forward.
The Court Battle
The EEO-1 form was revised during President Barack Obama's administration to add the Component 2 data, but the pay-data provisions were suspended in 2017 by President Donald Trump's administration. The NWLC challenged the Trump administration's hold on the pay-data collection provisions, and on March 4, Chutkan lifted the stay—meaning the federal government needed to start collecting the information.
On March 18, however, the EEOC opened the portal for employers to submit EEO-1 reports without including the pay-data questions. Chutkan subsequently told the government to come up with a plan.
The EEOC proposed the Sept. 30 deadline for employers to submit Component 2 data, claiming that the agency needed more time to address the associated collection challenges. Furthermore, the EEOC's chief data officer warned that rushing the data collection may yield poor quality data. Even with the additional time, the agency said it would need to spend more than $3 million to hire a contractor to provide the appropriate procedures and systems.
Robin Thurston, an attorney with Democracy Forward and counsel for the plaintiffs, said at an April 16 hearing that the plaintiffs don't want the agency to compromise quality. But they also wanted "sufficient assurances" that the EEOC will collect the data by Sept. 30.
On April 25, Chutkan ordered the government to provide the court and the plaintiffs with periodic updates on the EEOC's progress and to continue collection efforts until a certain threshold of employer responses has been received.
SOURCE: Nagele-Piazza, L. (2 May 2019) "Employers Must Report 2017 and 2018 EEO-1 Pay Data" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/eeo-1-pay-data-report-2017-2018.aspx
Making the Case for Pay Transparency
Is your organization increasing pay transparency? According to this article from SHRM, pay transparency is a strategic move that delivers measurable business benefits. Read this blog post to learn more.
Recommending to senior leadership that your organization increase pay transparency can be a difficult sell for HR professionals. However, pay transparency is a strategic move that delivers measurable business benefits – and it’s an issue on which HR should lead.
It is important to understand that most executives in America today rose through organizational ranks that viewed compensation as a private matter. Few within organizations had access to salary information, and even fewer talked about it. As a result, many leaders still believe it is appropriate to dissuade or prohibit employees from discussing their own compensation with other employees.
Yet we now understand these outdated cultural norms have contributed to the wage gap for women and minorities, among other negative outcomes. Pay transparency can help close those gaps and produce benefits for both employers and employees.
For example, providing employees with pay ranges for their current position and those positions in their career path sets realistic expectations. This is crucial, as many employees hold unrealistic expectations based on internet salary searches for job titles that often do not account for or accurately reflect important factors such as experience level, geography, company size, actual tasks and responsibilities, or other types of compensation. These unrealistic salary expectations create serious challenges, including employee disengagement, low morale and retention problems.
Clearly communicating your company’s pay ranges facilitates an open dialogue about how those ranges are set, when and why they change, and how employees can move up within them. These discussions in turn increase mutual trust and engagement and foster productive compensation communication — all of which help retain employees, which is especially important in today’s tight labor market.
Increasing pay transparency also helps businesses attract and retain a more diverse workforce, which numerous studies have demonstrated translates into better business results. Sharing compensation data advances this effort by ensuring women and minorities have a clearer picture of the going rate for their skill sets, education, experience and performance. While many factors contribute to pay gaps, women and minority groups may have accepted lower compensation in the past because they could not access the information necessary to determine what they should be making based on what they bring to the table.
While recommending greater pay transparency to senior leadership in your organization may seem daunting, it is an important discussion to have and a compelling case for HR professionals to make. In a highly competitive labor market, businesses that make the right strategic move of increasing pay transparency will ultimately attract and retain the best talent and come out ahead of those that do not.
SOURCE: Ponder, L. (4 April 2019) "Making the Case for Pay Transparency" (Web Blog Post). Retrieved from https://blog.shrm.org/blog/making-the-case-for-pay-transparency-0
DOL Focuses on ‘Joint Employer’ Definition
On April 1, the U.S. Department of Labor (DOL) announced a proposed rule that narrows the definition of "joint employer" under the Fair Labor Standards Act (FLSA). Read this blog post from SHRM to learn more about this proposed rule.
The U.S. Department of Labor (DOL) announced on April 1 a proposed rule that would narrow the definition of "joint employer" under the Fair Labor Standards Act (FLSA).
The proposed rule would align the FLSA's definition of joint-employer status to be consistent with the National Labor Relations Board's proposed rule and update the DOL's definition, which was adopted more than 60 years ago.
Four-Factor Test
The proposal addresses the circumstances under which businesses can be held jointly responsible for certain wage violations by contractors or franchisees—such as failing to pay minimum wage or overtime. A four-factor test would be used to analyze whether a potential joint employer exercises the power to:
- Hire or fire an employee.
- Supervise and control an employee's work schedules or employment conditions.
- Determine an employee's rate and method of pay.
- Maintain a worker's employment records.
The department's proposal offers guidance on how to apply the test and what additional factors should and shouldn't be considered to determine joint-employer status.
"This proposal would ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek," according to the DOL.
In 2017, the department withdrew an interpretation that had been issued by former President Barack Obama's administration that broadly defined "joint employer."
The Obama-era interpretation was expansive and could be taken to apply to many companies based on the nature of their business and relationships with other companies—even when those relationships are not generally understood to create a joint-employment relationship, said Mark Kisicki, an attorney with Ogletree Deakins in Phoenix.
The proposed test aligns with a more modern view of the workplace, said Marty Heller, an attorney with Fisher Phillips in Atlanta. The test is a modified version of the standard that some federal courts already apply, he noted.
Additional Clarity
Significantly, the proposed rule would remove the threat of businesses being deemed joint employers based on the mere possibility that they could exercise control over a worker's employment conditions, Heller said. A business may have the contractual right under a staffing-agency or franchise agreement to exercise control over employment conditions, but that's not the same as doing so.
The proposal focuses on the actual exercise of control, rather than potential (or reserved) but unexercised control, Kisicki explained.
The rule would also clarify that the following factors don't influence the joint-employer analysis:
- Having a franchisor business model.
- Providing a sample employee handbook to a franchisee.
- Allowing an employer to operate a facility on the company's grounds.
- Jointly participating with an employer in an apprenticeship program.
- Offering an association health or retirement plan to an employer or participating in a plan with the employer.
- Requiring a business partner to establish minimum wages and workplace-safety, sexual-harassment-prevention and other policies.
"The proposed changes are designed to reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections, promote greater uniformity among court decisions, reduce litigation and encourage innovation in the economy," according to the DOL.
The proposal provides a lot of examples that are important in the #MeToo era, said Tammy McCutchen, an attorney with Littler in Washington, D.C., and the former head of the DOL's Wage and Hour Division under President George W. Bush.
Importantly, companies would not be deemed joint employers simply because they ask or require their business partners to maintain anti-harassment policies, provide safety training or otherwise ensure that their business partners are good corporate citizens, she said.
Review Policies and Practices
Employers and other interested parties will have 60 days to comment on the proposed rule once it is published in the Federal Register. The DOL will review the comments before drafting a final rule—which will be sent to the Office of Management and Budget for review before it is published.
"Now is the time to review the proposal and decide if you want to submit a comment," Heller said. Employers that wish to comment on the proposal may do so by visiting www.regulations.gov.
"Take a look at what's been proposed, look at the examples in the fact sheet and the FAQs," McCutchen said. Employers may want to comment on any aspects of the examples that are confusing or don't address a company's particular circumstances. "Start thinking about your current business relationships and any adjustments that ought to be made," she said, noting that the DOL might make some changes to the rule before it is finalized.
"The proposed rule will not be adopted in the immediate future and will be challenged at various steps by worker-advocacy groups, so it will be quite some time before there is a tested, final rule that employers can safely rely upon," Kisicki said.
SOURCE: Nagele-Piazza, L. (1 April 2019) "DOL Focuses on ‘Joint Employer’ Definition" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/labor-department-seeks-to-revise-joint-employer-rule.aspx