by admin | Jun 13, 2018 | Flexible Spending Accounts, IRS
School’s out! Summer is here, and it’s the time of year when working parents have questions about using their Dependent Care Spending Accounts (DCSAs). Are summer camp expenses eligible? What about day versus overnight camps? Employers and benefit advisors want to be ready with answers about this valuable benefit program.
The following are the top summertime questions about DCSAs and reimbursable expenses:
1. What are the basic rules for reimbursable expenses?
Dependent care expenses, such as babysitting and daycare center costs, must be work-related to qualify for reimbursement. Work-related means the expenses are for the care of the employee’s child under age 13 to allow the employee to work. If the employee is married and filing jointly, the employee’s spouse also must be gainfully employed or looking for work (unless disabled or a full-time student).
In some cases, expenses to care for a disabled dependent, regardless of age, may be reimbursable. This article focuses on expenses for children under 13 since those are by far the most common type of DCSA reimbursement.
2. One of our employees and his family are taking a two-week vacation this summer, but his children’s daycare center will charge its regular fee. Are the expenses reimbursable even if the employee and spouse are off work?
Yes. In most cases, expenses are not eligible unless the dependent care services are necessary for the parents to work, but some exceptions apply. The IRS rules for DCSAs provide that expenses during short, temporary absences are eligible if the employee has to pay the child’s care provider. Absences of up to two weeks are automatically considered short, temporary absences. Depending on the circumstances, longer absences also may qualify.
3. During the school year, our employee uses her DCSA for her 10-year old’s after-school daycare center expenses. This summer, the child’s daycare will be provided by her 20-year old sister. If the older daughter bills for her services, are the costs eligible for reimbursement?
The answer depends on whether the employee or spouse can claim the older daughter as a tax dependent. If the older daughter can be claimed as a dependent, whether or not the employee actually claims her, she is not a qualifying dependent care provider under the DCSA rules.
If the older daughter cannot be claimed as a tax dependent, her charges for providing care are eligible expenses. The specific rule is that a child of the employee, whom the employee cannot claim as a dependent, may be a qualifying provider if the child is age 19 or older by the end of the year.
Note that the employee’s spouse or the child’s parent is never a qualifying provider.
4. One of our employees has to pay an application fee and deposit before her child starts attending a daycare center this summer. Are those expenses eligible for reimbursement?
Prepaid expenses are eligible for DCSA reimbursement, provided the costs are required in order for the child to receive care. In this case, after the daycare center begins providing care, the employee can be reimbursed for the application fee and deposit she paid. On the other hand, if the employee cancels and her child does not attend, then the application fee and deposit are not eligible expenses.
5. An employee will pay day camp expenses for his 8-year-old son and overnight camp expenses for his 12-year-old daughter this summer. Are both types of expenses eligible for reimbursement?
The day camp expenses generally are reimbursable. Expenses for overnight camp, however, are not eligible since overnight care is not work-related.
Under the IRS rules for DCSAs, expenses for food, lodging, clothing, education, and entertainment are not reimbursable. If, however, such expenses are small, incidental expenses that cannot be separated from the cost of caring for the child, they may be included for reimbursement. For instance, the day camp may include lunch, snacks, and some sports activities in its basic fee, which would be eligible for reimbursement.
6. An employee’s children go to private year-round schools. He pays tuition for one child’s grade school and fees for the other child’s nursery school. Are both types of expenses eligible for reimbursement?
Educational expenses are not reimbursable, unless the educational services are merely incidental as part of a child care service. Expenses to attend kindergarten or a higher grade are educational, so the older child’s school fees are not eligible for DCSA reimbursement. (Expenses for before- or after-school care, however, may qualify as reimbursable expenses.)
On the other hand, expenses for a child in nursery school, preschool, or a similar program for children below the level of kindergarten are expenses for care. Such expenses are not considered educational even though the nursery school may include some educational activities.
For detailed information about expenses eligible for DCSA reimbursement, the IRS provides a helpful guide: Publication 503 “Child and Dependent Care Expenses”. Have a fun summer!
Originally Published By ThinkHR.com
by admin | May 24, 2018 | Flexible Spending Accounts, IRS
Recently the Internal Revenue Service (IRS) issued its 2018 Publication 15-B, which informs
employers about employment tax treatment of fringe benefits.
Updates include:
- the suspension of qualified bicycle commuting reimbursements from an employee’s income for any tax year after December 31, 2017 and before January 1, 2026;
- the suspension of the exclusion for qualified moving expense reimbursements from an employee’s income for tax years after December 1, 2017 and before January 1, 2026 (with exceptions for active duty U.S. Armed Forces members who move because of a permanent change of station);
- limits on employers’ deductions for certain fringe benefits including meals and transportation commuting; and
- the definition of items that aren’t tangible personal property for purposes of employee achievement awards.
Originally Published By United Benefit Advisors
by admin | May 1, 2018 | Benefit Management, Group Benefit Plans, HSA/HRA, IRS
Friday, April 27, the Internal Revenue Service (IRS) announced that the 2018 annual contribution limit to Health Savings Accounts (HSAs) for persons with family coverage under a qualifying High Deductible Health Plan (HDHP) is restored to $6,900. The single-coverage limit of $3,450 is not affected.
This is the final word on what has been an unusual back-and-forth saga. The 2018 family limit of $6,900 had been announced in May 2017. Following passage of the Tax Cuts and Jobs Act in December 2017, however, the IRS was required to modify the methodology used in determining annual inflation-adjusted benefit limits. On March 5, 2018, the IRS announced the 2018 family limit was reduced by $50, retroactively, from $6,900 to $6,850. Since the 2018 tax year was already in progress, this small change was going to require HSA trustees and recordkeepers to implement not-so-small fixes to their systems. The IRS has listened to appeals from the industry, and now is providing relief by reinstating the original 2018 family limit of $6,900.
Employers that offer HSAs to their workers will receive information from their HSA administrator or trustee regarding any updates needed in their payroll files, systems, and employee communications. Note that some administrators had held off making changes after the IRS announcement in March, with the hopes that the IRS would change its position and restore the original limit. So employers will need to consider their specific case with their administrator to determine what steps are needed now.
HSA Summary
An HSA is a tax-exempt savings account employees can use to pay for qualified health expenses. To be eligible to contribute to an HSA, an employee:
- Must be covered by a qualified high deductible health plan (HDHP);
- Must not have any disqualifying health coverage (called “impermissible non-HDHP coverage”);
- Must not be enrolled in Medicare; and
- May not be claimed as a dependent on someone else’s tax return.
HSA 2018 Limits
Limits apply to HSAs based on whether an individual has self-only or family coverage under the qualifying HDHP.
2018 HSA contribution limit:
- Single: $3,450
- Family: $6,900
- Catch-up contributions for those age 55 and older remains at $1,000
2018 HDHP minimum deductible (not applicable to preventive services):
- Single: $1,350
- Family: $2,700
2018 HDHP maximum out-of-pocket limit:
- Single: $6,650
- Family: $13,300*
*If the HDHP is a nongrandfathered plan, a per-person limit of $7,350 also will apply due to the ACA’s cost-sharing provision for essential health benefits.
Originally posted on thinkHR.com
by admin | Apr 3, 2018 | Hot Topics, Human Resources, IRS, Workplace
Managing pay can be tricky. Handled incorrectly, pay can create problems for an employer — everything from the inability to attract the right candidates and losing great employees to the competition to presenteeism (employees who are physically in the workplace but not engaged in their work), employee relations issues, compliance audits, and lawsuits. These outcomes impact productivity. They infect the company culture. And they tarnish the employer brand.
In your role as a trusted advisor to clients who may be struggling with their total compensation programs, you need to be ready to help them determine how to make the right decisions. This requires you to be aware of new trends while also helping clients manage risk by complying with wage and hour rules.
Pay Versus Employee Motivation and Retention
Many employee engagement reports note that pay doesn’t impact motivation as much as other work factors, such as:
- The quality of the company and its management.
- Belief in the organization’s products.
- Alignment with the company’s mission, values, and goals.
- Ability to make a meaningful contribution.
- Ability to develop new professional skills.
IBM’s Smarter Workforce Institute’s 2017 study looked at employees’ decisions to leave their jobs and found that the three generations comprising most of today’s workforce would be open to considering new job opportunities for better compensation and benefits: Millennials at 77 percent, Generation X at 78 percent, and Baby Boomers at 70 percent. Those are big numbers, and they shouldn’t be ignored when designing pay plans.
Further, while pay may not be a motivator, it can be a powerful dissatisfier when employees believe that they aren’t being paid correctly for the value they are bringing to the organization, or at the market value of their jobs. Worse yet is the perceived — or real — belief that their pay is lower than what their co-workers are earning. In some markets, this problem is genuine, as companies in hot labor markets struggle with paying new people more than current employees, causing pay compression. Employees do talk and pay information is readily available.
Considering every variable that goes into compensation planning can be complicated. Your clients can start by: setting a compensation strategy to fit their company’s needs and budget; developing compensation programs to fit that strategy, the talent marketplace, and employee demographics; and then administering the compensation program fairly and in compliance with federal, state, and local laws.
Equal Pay Mandates
The Equal Employment Opportunity Commission’s (EEOC) Strategic Enforcement Plan prioritizes enforcing the Equal Pay Act (EPA) to close the pay gap between men and women, and the Trump administration has been silent about changing this direction. This topic is trending, as legislators in more than 40 jurisdictions introduced bills related to equal pay in 2017. California, New York, Massachusetts, and Maryland are setting the pace with laws addressing this issue. These states have set rules that more broadly define the equal pay standard requiring different factors, such as skill, effort, working conditions, and responsibility, in justifying gender pay disparities. These states are also broadening the geographic restrictions for employee pay differentials.
We expect that more states will enact equal pay rules in 2018. Companies should review gender pay differences in their workforce, document the bona fide business reasons for the differences, and correct wage disparities as needed. Permitted differences could include seniority, documented merit performance differences, pay based on quantity or quality of production or sales quotas, or geographic differentials.
Salary History Ban
The issue of pay has traditionally been an inevitable topic of discussion in any job interview. However, in a growing number of places throughout the country, an employer can no longer ask an applicant about his or her salary history. At least 21 states and Washington, D.C., along with several municipalities, have proposed legislation that would prohibit salary history questions. California (effective January 2018), Delaware (effective December 2017), Massachusetts (effective July 2018), and Oregon (effective January 2019) have enacted laws impacting private employers. More bans are expected at both the state and local level.
While the provisions of each law vary, they make it illegal for employers to ask applicants about their current compensation or how they were paid at past jobs. The rationale for these laws stems from the equal pay issue and the premise that pay for the job should be based on the value of the job to the organization, not the pay an applicant might be willing to accept. These laws are designed to reverse the pattern of wage inequality that resulted from past gender bias or discrimination.
For employers, this means:
- Establishing compensation ranges for open positions and asking applicants if the salary range for the position would meet their compensation expectations.
- Updating employment applications to remove the salary history information.
- Training hiring managers and interviewers to avoid asking questions about salary history.
Pay Transparency
Outside of certain industries, the public sector, and unionized environments where pay grades and step increases are common knowledge, historically many employers have had a practice of discouraging employees from openly discussing their compensation. That practice is fast becoming history, due to another notable trend in state legislatures: enacting laws that allow employees to discuss their wages and other forms of compensation with others. Although the provisions of the laws vary, California, Colorado, Connecticut, Delaware, Washington, D.C., Illinois, Louisiana, Maine, Maryland, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oregon, and Vermont now have laws in place allowing pay transparency.
In addition to these state laws, Section 7 of the National Labor Relations Act (NLRA) allows employees to engage in pay discussions as “concerted and protected activities for the purpose of collective bargaining or other mutual aid or protection.” During the Obama administration, the National Labor Relations Board (NLRB) broadly interpreted the NLRA’s Section 7 to side with employees’ rights to discuss wages and other terms and conditions of employment. Unless the Trump administration’s NLRB changes direction on this issue, which is not expected, the clear message for employers is to remove any prohibitions of employees discussing pay or working conditions with others.
Be Vigilant
Employee compensation has always been a hot topic, and this year the temperature will continue to rise. Keep abreast of legislative and regulatory changes that impact pay practices to help your clients stay in compliance with the pay laws that are spreading throughout the country.
Now is a good time to suggest that your clients consider conducting pay audits, updating compensation plans, making compensation adjustments where needed, training managers regarding pay strategy and practice, and communicating the company’s compensation strategy and incentive plans to employees.
By Laura Kerekes, SPHR, SHRM-SCP
Originally posted on thinkHR.com
by admin | Mar 14, 2018 | ACA, HSA/HRA, IRS
Taking control of health care expenses is on the top of most people’s to-do list for 2018. The average premium increase for 2018 is 18% for Affordable Care Act (ACA) plans. So, how do you save money on health care when the costs seems to keep increasing faster than wage increases? One way is through medical savings accounts.
Medical savings accounts are used in conjunction with High Deductible Health Plans (HDHP) and allow savers to use their pre-tax dollars to pay for qualified health care expenses. There are three major types of medical savings accounts as defined by the IRS. The Health Savings Account (HSA) is funded through an employer and is usually part of a salary reduction agreement. The employer establishes this account and contributes toward it through payroll deductions. The employee uses the balance to pay for qualified health care costs. Money in HSA is not forfeited at the end of the year if the employee does not use it. The Health Flexible Savings Account (FSA) can be funded by the employer, employee, or any other contributor. These pre-tax dollars are not part of a salary reduction plan and can be used for approved health care expenses. Money in this account can be rolled over by one of two ways: 1) balance used in first 2.5 months of new year or 2) up to $500 rolled over to new year. The third type of savings account is the Health Reimbursement Arrangement (HRA). This account may only be contributed to by the employer and is not included in the employee’s income. The employee then uses these contributions to pay for qualified medical expenses and the unused funds can be rolled over year to year.
There are many benefits to participating in a medical savings account. One major benefit is the control it gives to employee when paying for health care. As we move to a more consumer driven health plan arrangement, the individual can make informed choices on their medical expenses. They can “shop around” to get better pricing on everything from MRIs to prescription drugs. By placing the control of the funds back in the employee’s hands, the employer also sees a cost savings. Reduction in premiums as well as administrative costs are attractive to employers as they look to set up these accounts for their workforce. The ability to set aside funds pre-tax is advantageous to the savings savvy individual. The interest earned on these accounts is also tax-free.
The federal government made adjustments to contribution limits for medical savings accounts for 2018. For an individual purchasing single medical coverage, the yearly limit increased $50 from 2017 to a new total $3450. Family contribution limits also increased to $6850 for this year. Those over the age of 55 with single medical plans are now allowed to contribute $4450 and for families with the insurance provider over 55 the new limit is $7900.
Health care consumers can find ways to save money even as the cost of medical care increases. Contributing to health savings accounts benefits both the employee as well as the employer with cost savings on premiums and better informed choices on where to spend those medical dollars. The savings gained on these accounts even end up rewarding the consumer for making healthier lifestyle choices with lower out-of-pocket expenses for medical care. That’s a win-win for the healthy consumer!
