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In addition to payroll tax relief, the state of California is offering reporting relief to employers affected by recent natural disasters, including wildfires, for reporting unclaimed wages and unemployment insurance (UI) requests for information.
The Unclaimed Property Division (UPD) of the Comptroller’s Office announced that any holder (employer) that could not submit the Holder Notice Report by the November 1, 2017, deadline due to recent hurricanes or wildfires could file a Holder Request for Extension of Due Date. In California, unclaimed wages become abandoned after one year (see The Payroll Source®, §5.5) [UPD, Quarterly Newsletter for Holders, Fall 2017].
UI Requests for Information
Employers affected by recent wildfires that could not respond timely to an Employment Development Department (EDD) request for information on a current or former employee who has filed for UI benefits should still provide the required information. They should provide an explanation regarding the specific reason the business could not respond in a timely manner and include the county and name of the fire that affected the business. More information is available on the California Employment Development Department (EDD) website [EDD, Tax Branch News No. 360, 10-24-17].
Check back with Pay News Now as we continue to monitor any updates.
Alaska Governor Bill Walker recently proposed a 1.5% payroll tax (also called a head tax) on all wages earned in Alaska (by residents and nonresidents). This tax goes up to a cap of $2,200 per employee or twice the previous year’s Permanent Fund Dividend (PFD) amount, whichever is higher [Gov. Bill Walker, Executive Proclamation, 9-22-17, and Press Release No. 17-144, 9-22-17].
According to the governor, the tax would be “a new source of revenue to pay for troopers, teachers, transportation, and other essential services,” which is necessary because of the “downturn in oil prices.” During the past few years, the governor has supported state personal income tax legislation as a means of producing revenue. So far, the state legislature has not passed it.
Withholding Would Be Required in 2019
If enacted, employers would be required to begin withholding the payroll tax from wages earned on or after January 1, 2019. Though not yet numbered, the bill can be accessed online in a House or Senate packet.
Pay News Now will continue to monitor the status of the proposed payroll tax.
Recently, Rhode Island Governor Gina Raimondo signed the Healthy and Safe Families and Workplaces Act (Act) [H.B. 5413, L. 2017]. The law requires employers to provide certain employees with paid sick leave (PSL), effective July 1, 2018. Currently, Arizona, California, Connecticut, District of Columbia, Massachusetts, Oregon, Vermont, and Washington have laws requiring certain employers to provide PSL, along with several cities and counties. The Rhode Island Department of Labor and Training (DLT) is tasked with enforcing the new PSL requirements.
The Act will require employers with 18 or more employees to provide certain employees with one hour of PSL for every 35 hours worked, up to a maximum of 24 hours during calendar year 2018, 32 hours during calendar year 2019, and 40 hours every year thereafter. Accrual begins on an employee’s first day of employment or on the law’s effective date (July 1, 2018), whichever is later. Employers can require newly hired employees to wait 90 days before using accrued PSL. Accrued paid sick days will carry over to the following year of employment, however, an employee may only use up to 24 hours in 2018, up to 32 hours in 2019, and up to 40 hours every year thereafter.
An employer that already has an equivalent PSL program or paid time off (PTO) policy in place does not have to provide additional PSL under the law, so long as the leave can be used for the same purposes and in a manner consistent with the Act.
Notice and Posting Requirements
Every employer subject to the Act must keep a summary of it, approved by the DLT, and copies of any applicable wage orders and regulations issued under the Act, posted in a visible and accessible place in or about the premises where any person subject to them is employed.
Pay News Now will continue monitoring states that enact paid sick leave laws.
On October 13, the Social Security Administration (SSA) announced that the 2018 social security wage base will be $128,700, an increase of $1,500 from $127,200 in 2017.
Below are the additional tax breakouts:
- Maximum social security tax - The maximum 2018 social security tax employees and employers will each pay is $7,979.40. This is an increase of $93, from $7,886.40 in 2017.
- Medicare tax - 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. As in 2017, wages paid in excess of $200,000 in 2018 will be subject to an extra 0.9% Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax. Note that the $200,000 threshold for the additional Medicare tax is not subject to adjustments for inflation.
- FICA (combined) tax - The 2018 FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% up to the social security wage base.
In its 2017 annual report, the Board of Trustees of the Social Security Trust Fund projected that the 2018 social security wage base would be $130,500, which is $1,800 more than the actual amount. Employers that budgeted for its 2018 FICA tax expense based on the trustees’ projection will need to go back and recalculate that number.
FICA Coverage Threshold for Domestic, Election Workers
The threshold for coverage under social security and Medicare for domestic employees (i.e., the “nanny tax”) will be $2,100 in 2018, up from $2,000 for 2017; the coverage threshold for election workers will remain unchanged at $1,800 in 2018.
APA members can read the SSA fact sheet on the “Forms” section of the APA's website. Pay News Now will continue to monitor or provide any updates.
The California Labor and Workforce Development Agency (LWDA) is informing employers that President Trump’s decision to end the federal Deferred Action for Childhood Arrivals (DACA) program does not require employers to immediately re-verify work authorization documents [LWDA, Press Release, 9-6-17]. In addition, New York City has provided information for workers affected by DACA that indirectly provides some guidance for employers.
Work Authorization Does Not Need to be Re-Verified in California
LWDA Secretary, David M. Lanier said, “With the announcement to phase out the DACA program, the California LWDA and its partner departments affirm the action does not require an immediate re-verification of work authorization documents for DACA recipients. Any action or attempt by employers to re-investigate or re-verify work authorization documents in order to retaliate against any immigrant worker is unlawful in California.” It is unclear what will happen when an employee’s work authorization expires.
New York City Provides Information on Employment Verification
The New York City Mayor’s Office of Immigrant Affairs has posted information for “dreamers” (individuals working in the country under the DACA program) affected by the DACA decision that may also be helpful to employers. According to the agency, employment authorization cards are valid until expiration, unless terminated or revoked individually. While social security numbers (SSNs) do not expire, if a worker no longer has work authorization, the SSN will no longer be valid for an E-Verify employment authorization check.
Pay News Now will continue to monitor any updates to the Deferred Action for Childhood Arrivals program.
On August 31, a Texas federal district court ordered that the U.S. Department of Labor's (DOL) rule, which would have increased the minimum salary threshold for exempt “white collar” employees from $455 to $913 per week, is invalid [Nevada v. U.S. Department of Labor, No. 4:16-CV-731 (E.D. Texas, 8-31-17)].
In doing so, the court confirmed a preliminary order issued in November 2016 that temporarily blocked the rule from taking effect. The court said that the higher salary level impermissibly undercut the effectiveness of the duties test. The court also found the mechanism that would have adjusted the salary level for inflation was invalid.
Earlier in the legal proceedings, the DOL signaled that it would revise the regulation and has published a request for information in the Federal Register. Comments are due by September 25. Until new regulations are issued or there is a successful appeal of this decision, the current salary threshold and duties test remain in effect.
Pay News Now will continue to monitor the evolution of the DOL’s overtime rule as it unfolds in the coming months. Comment below and let us know what you think of the federal court’s decision to block increasing the minimum salary threshold for exempt “white collar” employees.
There will be a new 0.1% Public Transportation Payroll Tax on employee wages in Oregon, effective July 1, 2018 [H.B. 2017, L. 2017]. The new tax will fund transit projects in the state.
Who Will Be Taxed?
The tax will be imposed on state residents regardless of where services are performed and nonresidents for services performed in the state.
Nexus Required for Withholding
Employers will withhold the tax from nonresident employees’ wages and from certain resident employees’ wages. Residents subject to the new tax who work out of state for an employer not doing business in Oregon will report and pay the tax themselves (i.e., an employer with no nexus is not required to withhold the tax).
Employer Reporting and Penalties
An employer will report and pay the tax to the Oregon Department of Revenue (DOR) at the time and manner determined by the rule (the tax may be included in the Oregon combined quarterly tax report). An annual return will have to be filed with the DOR. If an employer fails to deduct and withhold the tax as required, it will be responsible for the amount of the tax and a penalty of $250 per employee, up to a maximum of $25,000, if the failure is willful.
More information, including rules and guidance issued by the DOR, will be reported in PayState Update when available.
On August 8, Oregon Governor Kate Brown signed legislation making Oregon the first state to set fair scheduling requirements for employers in certain industries [S.B. 828, L. 2017]. Several cities have already enacted similar laws, including Emeryville, New York City, Seattle, and San Francisco. Most provisions of the law are set to take effect July 1, 2018.
Covered employers include retail, hospitality, and food services establishments that employ 500 or more employees worldwide.
Employers must provide employees with:
- Good faith estimates of employee work schedules
- Advance notice of the work schedule (at least seven calendar days)
- The right to rest between work shifts
- Compensation for work schedule changes (under certain circumstances)
Notice and Recordkeeping Requirements, Enforcement
The Oregon Bureau of Labor and Industries will enforce the law and will develop a template for a notice poster that must be displayed at the workplace. The poster may be distributed electronically to employees who work remotely. An employer must maintain records that document compliance with the law for three years. Employers will be subject to penalties of up to $500 and $1,000 for certain violations under the law, effective January 1, 2019.
Pay News Now will continue to monitor or provide any updates.
California and the Virgin Islands have applied to the U.S. Department of Labor (DOL) for a Benefit Cost Rate (BCR; sometimes referred to as Benefit Cost Ratio) add-on waiver by the, deadline. California and the Virgin Islands are on the DOL’s updated list of potential Federal Unemployment Tax Act (FUTA) credit reduction states for 2017 [DOL, Potential 2017 Federal Unemployment Tax Act (FUTA) Credit Reductions, rev. July 2017]. States had until July 1, 2017, to apply for a waiver.
What Is BCR Add-on?
The BCR add-on is in addition to the 0.3% per year FUTA credit reduction (see The Payroll Source®, p. 7-8). The additional tax varies by state and is based on a complex calculation. The calculation compares the average benefits that have been paid out by the state, the taxable wages, and the average tax rate on taxable wages in the state.
California and the Virgin Islands continue to have outstanding Federal Unemployment Account (FUA) loans, and, therefore, will likely be subject to a 2017 FUTA credit reduction. The credit reduction was also predicted in the spring, with the potential total credit reduction remaining 2.1% for California and 3.2% for the Virgin Islands unless it receives the BCR waiver.
Note that California may not have been subject to the BCR add-on for 2017. The calculation is based on the difference between a state's average total Unemployment Insurance (UI) benefits paid over the past five years and the state's average UI tax rate in the previous year. The calculation, using estimated wages, came out to zero for California because its average tax rate was greater than its average UI benefits for the past five years. However, the state applied for the waiver, “just in case.”
Deadline For Credit Reduction
The final determination of FUTA credit reductions will not be made until the November 10, 2017, repayment deadline.
Pay News Now will continue to monitor any updates to the FUTA credit reductions.
On July 5, Washington Governor Jay Inslee signed paid family and medical leave insurance legislation [S.B. 5975, L. 2017]. Effective January 1, 2020, eligible employees will be entitled to paid leave to care for a new child or sick family member. Effective January 1, 2019, employers and employees will begin making contributions to fund the program. The Washington Department of Labor and Industries will administer the program.
Plan Funded Through Payroll Deductions
Employers and employees will both make contributions to the paid family and medical leave insurance program through payroll deductions.
Beginning January 1, 2019, the total premium will be 0.4% of an employee’s wages (up to a maximum amount that will be set annually). The employer will pay at least 37% and the employee will pay 63%.
Example: A full-time worker earning $15 an hour ($600 per week) would contribute $1.51 per week toward the benefit, while the employer would pay 89 cents (for a total of $2.40 per week). An employer may elect to pay all or any portion of the employee’s contribution.
Paid Family Leave Previously Enacted, Never Took Effect
On May 8, 2007, a family leave insurance program that would have provided up to five weeks of paid leave to care for a newborn or newly adopted child was signed into law in Washington. The law was set to take effect in 2009, but was delayed and never took effect. The law did not provide how the program was to be funded and a funding mechanism was never agreed upon.
Pay News Now will continue to monitor any states that enact paid family and medical leave.