Act 32 affects every Pennsylvania employer and businesses with employees that work in Pennsylvania. Learn exactly what Act 32 is, how it impacts PA businesses and what your employees need to know about how it could affect their local income tax withholding. The good news is that if you work with a payroll services company, most of this is probably being handled for you. It is important to check with your payroll provider before you take any action to make sure efforts are not being duplicated.
What is Act 32?
In July of 2008, Governor Ed Rendell signed an amendment to the Local Tax Enabling Act (LTEA) with the objective of consolidating and simplifying the local earned income tax (EIT) collection system on a countywide basis. Act 32 is the law that standardizes and streamlines this system. Act 32 restructures Pennsylvania’s local earned income tax collection system into 69 Tax Collection Districts (TCD) which are predominately based on county boundaries. The appointment of collection responsibility falls on countywide committees made up of representatives from local municipalities and school districts. The committees established tax collection districts and elected tax officers to collect the EIT.
Under Act 32, each county, with the exception of Philadelphia and Allegheny counties, will select a single local collector or tax officer to service the needs of that county. Philadelphia County is exempt from Act 32. Allegheny County, due to its size, has been divided into 4 tax collection districts. For most PA employers, the Act applies to the earned income taxes levied and collected after December 31, 2011. However, Chester, Lebanon and Wyoming counties have become early adopters of the Act 32 state tax act. Employers located in early-adopting TCDs should take immediate action to ensure proper implementation if it has not already been completed.
Employers must begin to withhold the local EIT from employees on January 1, 2012. Appointed tax officers start collecting the EIT on January 1, 2012, unless the tax collection district has been approved for early implementation. Mandatory withholding of earned income tax is effective in 2011 for employers in the three tax collection districts that have been approved for Act 32 early implementation: Chester, Lebanon and Wyoming counties.
How Does Act 32 Impact PA Businesses?
Employers who maintain worksites in Pennsylvania or employ individuals who may work from their homes are required to withhold applicable earned income tax from those employees. Under Act 32, all employers with locations in Pennsylvania will be required to now withhold local earned income taxes (EIT) from their employees based on the higher of two (2) tax rates the employee can be subject to: either the employee’s resident tax rate or the employer jurisdiction’s non-resident rate. Employers who intentionally don't collect and distribute the taxes could face severe penalties and possible jail time.
Employers are required to have every employee complete a Residency Certification Form, which shall be an addendum to the Federal Employee's Withholding Allowance Certificate (Form W-4). This certification form provides information to help identify the political subdivisions where the employee lives and works.
Download the Act 32 Political Subdivision (PSD) Codes List
A copy of this Residency Certification Form should be retained by the employer along with the employee’s completed Form W-4, I-9 form, direct deposit authorization form and other employment forms. This form should be updated any time an employee has a change of address or work location.
What Your Employees Need to Know
It is important to advise your employees that they may experience a change in their local income tax withholding in 2012 once these mandatory Act 32 changes are made... especially if your business did not previously withhold local taxes for jurisdictions outside of where your company is located.
The Internal Revenue Service is holding a free, one-hour webinar on Monday, October 31st on the reporting requirements of employer-provided health care coverage on employee W-2 forms. This webinar will discuss when and how to start reporting the cost of coverage on Form W-2, what changes employees would see on the form related to coverage reporting and what transitional relief would be available for certain employers and plans.
As we have discussed in previous blog articles, the Affordable Care Act requires employers to report the value of the employer-provided health care coverage they provide on each employee’s annual W-2 form. Below is an excerpt from this blog article providing details on which employers will be required to report the cost of health coverage on Form W-2 and when.
Interim Guidance Provides Further Relief for Small Employers
In the interim guidance issued on March 29, 2011, the IRS provided more details related to reporting health coverage on W-2 forms. These include…
- Smaller employers filing fewer than 250 Forms W-2 for 2011 are not required to report the cost of health care coverage on the 2012 W-2 forms… giving them transition relief for 1 year.
- Employers filing more than 250 W-2 forms for 2011 will not be required to report the cost of health coverage on any forms furnished to employees until January 2013.
- The total cost of coverage is not required to be reported on Form W-3, Transmittal of Wage and Tax Statements.
Using a question-and-answer format, Notice 2011-28 provides guidance for employers that are subject to this requirement for the 2012 W-2 forms and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
View the IRS YouTube Video: Health Care: W-2 Health Insurance Reporting
Who Should Attend the Upcoming IRS W-2 Reporting Webinar?
The IRS webinar is scheduled for October 31st at 2:00 p.m. Eastern Time, 1:00 p.m. Central Time, 12:00 p.m. Mountain Time and 11:00 a.m. Pacific Time and is recommended for:
- Tax professionals
- Payroll professionals
- Industry partners
- Small businesses
What Questions Will be Answered During the Health Care Coverage Reporting Webinar?
The Reporting of Employer-Sponsored Health Plan Coverage on Form W-2 (Affordable Care Act Provision 9002) webinar will explain what employers and employees need to know about the provision including:
- What changes employees will see in their Form W-2 due to the coverage reporting
- When employers must begin reporting the cost of coverage on the Form W-2
- Transitional relief for certain employers, plans and situations
- Which employers need to report the cost of coverage on the Form W-2
- How employers will report the cost of coverage on the Form W-2
- What valuation methods employers can use to determine the amounts to report on the Form W-2
CPE credit is not being offered for this webinar. To contact the IRS Small Business/Self-Employed Division regarding this webinar, you can email them at email@example.com.
If you miss the October 31st webinar, it will be archived on the IRS Video portal for later viewing approximately three weeks after the date of the event.
PrimePay will be attending this IRS webinar. We'll post additional blog articles after the webinar outlining the topics discussed and answering some of the questions above.
Sign Up for the Reporting of Employer-Provided Health Care Coverage on Form W-2 Webinar
Recently, the Federal government has announced the 2012 Social Security taxable wage base and pension plan limits.
2012 Social Security Wage Base
The Social Security Administration (SSA) announced that the 2012 Social Security wage base will be $110,100, up from $106,800 where it has been set for the past three years. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable wage base.
Read the CNNMoney.com Article: 10 Million Could Pay More Social Security Tax
With the 2012 Social Security wage base at $110,100, the maximum Old-Age, Survivors, and Disability Insurance (OASDI) tax payable by an employee is $6,826.20 or 6.2 percent of the wage base. The employer matches the amount with an equal contribution.
The Medicare portion of the Federal Insurance Contributions Act (FICA) tax continues to apply to all taxable wages earned and the rate remains at 1.45 percent.
It is important to note that the 2011 FICA tax rate is 4.2% for employees and 6.2% for employers under the 2010 Tax Relief Act. Currently that rate is scheduled to be 6.2% for both employees and employers in 2012. However, there is legislation that is currently being considered which may impact the 2012 FICA tax rate.
Access the 2012 Social Security Fact Sheet
Social Security Wage Base History
Wonder how much the Social Security payroll tax limits have changed over the last ten years? Here are the Social Security taxable wage base limits since 2003:
- 2003 wage base: $87,000
- 2004 wage base: $87,900
- 2005 wage base: $90,000
- 2006 wage base: $94,200
- 2007 wage base: $97,500
- 2008 wage base: $102,000
- 2009 wage base: $106,800
- 2010 wage base: $106,800
- 2011 wage base: $106,800
- 2012 wage base: $110,100
2012 Pension Plan Limits
The Federal government sets dollar limits as to how much an employee can contribute to their company’s qualified retirement plan each tax year. These limits are based on the cost-of-living index. If an employee reaches the age of 50 during the current tax year, they will qualify for the “Catch Up” provision… only if it is an established provision of the Company’s 401(k) plan.
The Internal Revenue Service (IRS) announced the 2012 limits pertaining to 401(k) retirement plans and other defined contribution plans. In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.
Here are some of the 2012 highlights:
- The 2012 contribution limit for employees who participate in 401(k), 403(b) or 457(b) plans, and the Federal government’s Thrift Savings Plan increased from $16,500 to $17,000.
- The catch-up contribution limit under those plans, for those aged 50 and over, remains unchanged at $5,500.
- The limitation regarding SIMPLE retirement accounts remains unchanged at $11,500.
For More Details Read: IRS Announces Pension Plan Limitations for 2012
Throughout the year, we will develop news briefs to help you stay up-to-date with the most important news that could directly impact your business. These articles contain snippets of news released from Federal and state government agencies. News Brief #4 focuses on an amendment to California’s Fair Employment and Housing Act related to pregnancy disability leave and six states that have already announced their 2012 minimum wage rates.
Amendment Requires California Employers to Maintain Coverage of Eligible Female Employees Who Take Pregnancy Disability Leave
California’s Fair Employment and Housing Act requires employers with 5 or more employees to grant an employee disabled by pregnancy a reasonable period of time for disability leave (up to 4 months), called pregnancy disability leave or PDL. PDL is available when an employee is actually disabled as a result of pregnancy, childbirth, or related medical conditions. On October 6, 2011, Governor Brown signed into law an amendment to the state’s PDL law. Effective January 1, 2012, the new law:
- Prohibits employers from refusing to maintain and pay for coverage of eligible female employees who take PDL under a group health plan for the duration of the leave (not to exceed 4 months over the course of a 12-month period).
- Requires that the group health plan remain at the level and under the conditions the coverage would have been provided if the employee had continued in employment continuously for the duration of the leave.
- Provides a limited right to employers to recover from an employee the premiums paid for maintaining this coverage.
State Minimum Wage Increases Beginning January 1, 2012
Florida Increases to $7.67 Per Hour Beginning January 1, 2012
The Florida Department of Economic Opportunity has announced that, effective January 1, 2012, the minimum wage in Florida will rise to $7.67 per hour for non-tipped employees and to $4.65 per hour for tipped employees. To download and print the 2012 minimum wage poster, please click on a link below.
Arizona Increases to $7.65 Per Hour Beginning January 1, 2012
The Industrial Commission of Arizona has announced that the minimum wage in Arizona will rise to $7.65 per hour, effective January 1, 2012. The new poster reflecting the increase is not yet available.
Washington Increases to $9.04 Per Hour Beginning January 1, 2012
The Washington Department of Labor and Industries has announced that the minimum wage in Washington will rise to $9.04 per hour, a 37-cent increase, effective January 1, 2012.
Washington is one of 10 states that adjusts the minimum wage based on inflation and the Consumer Price Index (CPI). The others are Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon and Vermont.
Washington state has the highest minimum wage, followed by Oregon. Oregon recently announced that its minimum wage will rise 30 cents to $8.80 an hour in 2012.
Ohio Increases to $7.70 Per Hour Beginning January 1, 2012
The Ohio Department of Commerce has announced that, effective January 1, 2012, the minimum wage in Ohio will rise to $7.70 per hour for non-tipped employees and to $3.85 per hour for tipped employees. The increased minimum wage will apply to employers who gross more than $283,000 per year. Currently, Ohio’s minimum wage applies to employers who gross over $271,000 per year. Download the 2012 Ohio minimum wage poster.
Montana Increases to $7.65 Per Hour Beginning January 1, 2012
The Montana Department of Labor and Industry has announced that the minimum wage in Montana will rise to $7.65 per hour, effective January 1, 2012. The latest Montana poster reflects both the 2011 and the new 2012 minimum wage rates.
Oregon Increases to $8.80 Per Hour Beginning January 1, 2012
The Oregon Bureau of Labor and Industries has announced that the Oregon state minimum wage will rise to $8.80 per hour, effective January 1, 2012.
Revised minimum wage posters reflecting the new rate will be available for free download from the Bureau’s website in December.
In 2010, bswift launched a benchmarking study to determine the state of automation in benefits administration. Specifically, the study sought to understand what opportunities for accuracy, efficiency and overall bottom line savings were being lost to under-automation of key processes.
In 2011, bswift revisited the question of benefits administration automation to determine how far companies have come. The 2011 study also examines another tactic companies are taking to confront the challenge of spiraling health care costs: wellness programs. The study indicates that an increasing number of employers are leveraging wellness programs and benefits automation to stimulate employee engagement and control health care costs.
Among other topics bswift set out to learn: in which specific wellness initiatives are companies investing? How are companies stimulating employee engagement in their wellness programs? How aggressive are wellness incentives today?
Critical Insights from the Wellness and Benefits Administration Benchmarking Study
The second annual bswift Wellness and Benefits Administration Benchmarking Study asked these questions and more. HR professionals responded, revealing two critical insights:
- Companies are investing more in wellness programs and effective incentives, particularly for the completion of Health Risk Assessments and biometric tests, to help combat the ever-growing cost of health care.
- Companies continue to leave money on the table when it comes to automation. While companies are taking steps toward full automation, most are still overly reliant on archaic manual processes. The biggest opportunities include new hire alerts, dependent “age out” automation and bill reconciliation.
Trends and Best Practices for Wellness Programs and Benefits Automation
The study provides valuable details on the trends and best practices for wellness programs and benefits automation from both large and small companies in a variety of industries. Key findings include:
- The percentage of companies offering wellness incentives increased significantly from 49% in 2010 to 68% in 2011
- Biometrics are quickly becoming the cornerstone of wellness programs: 62 percent of companies are testing in 2011
- Companies are migrating to online enrollment for new hires in significant numbers, although 22 percent still have not automated the new hire enrollment process at all
- 84 percent manually alert new hires of incomplete enrollments
- Only half of employers have an automated dependent “age out” process for canceling coverage (e.g., reaching age 26)
- 21 percent still manually reconcile paper health insurance invoices against benefit records or do not reconcile at all
- Companies that fully automate their benefits administration processes can realize savings of $19.07 PEPM (per employee per month)
How Does Your Company Stack Up on Wellness Programs and Benefits Automation?
The following is a guest blog post by Brendan Nicholls, Sales Manager at PrimePay.
In one of our August blog articles… Final Ruling on Controversial Employee Rights Notification… we reported that employers would be required to post the new employee rights notice as of November 14, 2011.
The National Labor Relations Board (NLRB) has postponed the implementation date for its new employee rights notice-posting rule until January 31, 2012 in order to allow for improved education and outreach to employers, particularly those who operate small and medium sized businesses.
The postponement was a result of uncertainty regarding which businesses fall under the Board’s jurisdiction, and was done with the goal of broad voluntary compliance. As a result of the postponement, most private sector employers will be required to post the 11-by-17-inch notice beginning on January 31, 2012.
The notice is available at no cost from the NLRB through its website, either by downloading and printing or ordering a print by mail. Copies also are available from any of the agency’s regional offices. In addition, employers should publish a link to the notice on an internal or external website if other personnel policies or workplace notices are posted there.
For further information about the employee rights notice posting, including a detailed discussion of which employers are covered by the NLRA, and what to do if a substantial share of the workplace speaks a language other than English, please see the NLRB’s Frequently Asked Questions.
Frequently Asked Questions Regarding the New Employee Rights Notice
We’ve pulled five of the most frequently asked questions from the NLRB website and posted the answers here…
- Does my company have to post the notice?
The posting requirement applies to all private-sector employers within the Board’s jurisdiction. This includes most private-sector employers, including labor unions, but excludes agricultural, railroad and airline employers, as well as very small employers that conduct an insufficient volume of business to have more than a slight effect on interstate commerce.
- What if I operate a religiously-affiliated institution?
The Board has asserted jurisdiction over some religiously-affiliated employers in the past, but has declined to assert jurisdiction over others. Because this is a complex issue, such employers are advised to contact their Regional Office.
- What if my organization is a non-profit?
Non-profit organizations are not exempted from the NLRA and are thus required to post the Notice.
- What if my employees work at remote sites and would not see a posting in the main office?
Employers with remote worksites should post the Notice at those locations to ensure that all employees are notified of their rights.
- Where should the Notice be posted?
The Notice should be posted in conspicuous places, where other workplace rights notices and company notices concerning personnel rules or policies are customarily posted. Reasonable steps should be taken to ensure the Notice is not altered, defaced, or covered by any other material, or otherwise rendered unreadable.
New Employee Rights Poster Downloads Available from NLRB
PLEASE NOTE: The poster is required to be 11 x 17 inches, in color or in black-and-white. When printing to full size, be sure to set your printer output to 11 x 17. Or you may print the two 8.5 x 11 pages and tape them together.
English Version of the New Employee Rights Notice
Spanish Version of the New Employee Rights Notice
Nevada has now joined the ranks of several other states that limit cell phone usage while driving. The new law, effective October 1, 2011, but not to be enforced until January 1, 2012, generally makes it unlawful to talk or text on a cell phone while driving without the use of a hands-free device. Here are the details.
What the Law Prohibits
The new law makes it unlawful to type or read text messages, emails, or instant messages while driving a vehicle. It also makes it unlawful to make or receive phone calls while driving unless the individual uses a hands-free device. There appears to be an exception for entering in someone's phone number to initiate the call, but the law's language is not entirely clear, and there will likely be some disagreement over how it is enforced.
There are also exceptions to cover emergency situations and for police officers, firefighters, and ambulance drivers. Also, for those who have cars from the future, there is an exception "if the motor vehicle is driven autonomously through the use of artificial-intelligence software."
The law is effective October 1, 2011, but no citations will be given for violating the law until January 1, 2012. For a violation between October 1 and January 1, the police are only supposed to give a warning. Note, however, that – as with any other traffic stop – being pulled over for violating the new cell phone law, even during the non-ticketing phase, could lead to being ticketed for other violations.
Advice for Employers
When an employee is driving as part of the job and causes an accident, there is always the potential for employer liability. If the injured party can prove that the employee was negligent, and was acting within the course and scope of employment, the employer will be vicariously liable for the injury. This has always been the case, new law or not.
But, if the employee violates a statute when injuring someone, then proof of negligence is virtually automatic. For example, before the new cell phone law, an injured party still had to prove the employee was acting negligently by texting on their cell phone while driving. The new law makes proving negligence easier because the employee violated the statute (unless one of the exceptions apply). Therefore, after October 1, if an employee is texting while driving and injures someone, liability is very likely.
The best way to protect your company is to make sure that your employee handbook includes a policy specifically prohibiting employees from doing the things covered by the new law. This will not only help cut down on accidents, it can also provide a defense in the event of a lawsuit. A company might argue that the employee was not acting within the course and scope of employment because the employer's policy prohibits that activity. That could help avoid vicarious liability.
The text for this article was originally published on Fisher & Phillips’ Legal Alerts. This Legal Alert is intended to provide an overview of an important new law. It is not intended to be, nor should it be construed as, legal advice for any particular fact situation. For further advice about how this law affects your business, contact any attorney in the Las Vegas office of Fisher & Phillips at 702.252.3131.
Want to Review Sample Cell Phone Use Policies?
Read Our Blog Article… OSHA May Fine You If Your Employee Text While Driving
The following is a guest blog post by Steve Jackson, Vice President, Benefit Services at PrimePay.
Giving your employees the ability to put away pre-tax dollars for medical and dependent care expenses is a huge value-add when it comes to the benefits package businesses offer. A Flexible Spending Account (FSA) allows your employees to set aside a certain dollar amount from each payroll check and pay for qualified health care and dependent care benefits on a pre-tax basis. During the year, employees can use this account to pay for medical expenses that are not covered by insurance.
While your employees realize an increase in their spending power and a substantial tax savings, Flexible Spending Accounts can also save your company thousands of dollars a year on FICA taxes. When employees use tax-free dollars to pay for health care expenses through a flex account, your company saves about 8% (7.65% FICA match) on every dollar your employees contribute to the plan. Depending on the size of your company, offering a pre-tax health care option to your employees can give your business its own substantial tax savings.
Let’s take a look at 8 of the most frequently asked questions regarding Flexible Spending Accounts:
1. Can an employer fund an employee’s FSA account?
Yes, the funding can be made each payroll period, monthly, quarterly or annually. The contribution may be in the form of a match or fixed dollar amount. The employer’s contribution must be consistent to all eligible employees.
Learn the Top 3 Reasons to Establish a Flex Health Care Account
2. As an employer, if we have an HRA, can we still implement an FSA?
Yes, these benefits co-exist very well together. In no case may an employee be reimbursed for the same medical care expense by both an HRA and a Health FSA. If coverage is provided under an HRA and a Health FSA for the same medical care expenses, the Plan Document for the HRA may specify the ordering rules for these expenses.
3. Do all claims need to be substantiated?
Yes, an FSA may only provide benefits that reimburse expenses for medical expenses as defined in § 213 (d). Each medical care expense submitted for reimbursement must be substantiated.
4. Can you contribute to an FSA if you are contributing to a Health Savings Account (HSA)?
No, you are unable to contribute to a Health Savings Account if you are currently participating in a general-purpose Flexible Spending Account. You may participate in a limited-purpose FSA (for vision, dental and preventative services only) or post-deductible FSA and contribute to an HSA.
5. Is an FSA subject to COBRA continuation requirements?
Yes, if the Health FSA qualifies for the Special Limited COBRA obligation, then COBRA must be offered to an employee if the amount they have contributed plan-to-date is greater than the amount they have been reimbursed. If the Health FSA does not qualify for the Special Limited COBRA obligation, COBRA must be offered for all Flexible Spending Accounts and again offered at open enrollment. FSA COBRA premiums are equal to the employee’s monthly contributions plus an additional 2% administrative fee. This administrative fee is an optional fee, allowed by law, that an employer can charge a participant for administering the COBRA plan. In the event an employee fails to make premium payments, the employer has the right to terminate COBRA coverage.
6. Can all owners participate in the FSA Plan?
No, sole proprietors, 2% or greater S-Corp shareholders (includes family members) and partners in a partnership are not eligible to participate.
7. Are all employees eligible to participate?
Yes, however, the employer has the ability to exclude employees based on the number of hours worked, a minimum age requirement, a waiting period for newly hired employees and being members of a bargaining unit (certain family members may also be excluded).
8. Are there nondiscrimination testing requirements for an FSA? What about the IRS 5500 form?
Yes, there is an annual non-discrimination testing requirement that focuses on the Highly Compensated and Key Employees of the company. You only need to file a 5500 form if you have over 100 employees participating in the Health FSA at the beginning of the plan year.