Tag: employee benefits

September 6, 2018

Higher New York Paid Family Leave Rates in 2019

How is your company coping with New York Paid Family Leave so far? Remember that the paid family leave rates change next year. This includes both how much employees will pay for this statutory benefit and how much they can receive.

Employee Contributions

The New York Department of Financial Services (DFS) has announced the maximum employee-contribution rate for 2019. It will increase from 0.126% to 0.153% of the employee’s gross wages, up to an annual maximum. This maximum annual contribution will be $107.97 in 2019 compared to $85.56 in 2018.

This means an additional cost of up to $22.41 for many employees.

Paid Family Leave Benefits

But it’s not all bad news for workers. DFS also confirmed that the weekly paid family leave benefit will increase in 2019. The weekly benefit rate increases from 50% of the employee’s average weekly wage to 55%. This percentage only applies up to the first $1,357.10 of weekly earnings. An employee who earns more than that can only receive $746.40 per week in paid family leave benefits.

Plus, as originally scheduled, eligible employees may take two more weeks of paid family leave in 2019. The maximum allowance increases from 8 to 10 weeks.

Future Paid Family Leave Rates

Expect the contribution and benefit rates to change again.

Under the original schedule, maximum weekly benefits will increase to 60% of the average weekly wage in 2020 and 67% in 2021. The NYS Superintendent of Financial Services could delay these increases, but did not do so for 2019.

The maximum leave allowance will increase to 12 weeks per year beginning in 2021.

What Must Employers Do?

Companies should confirm their 2019 paid family leave premiums with their insurance carriers. Then make sure that next year’s payroll will include the correct contribution rates.

If your paid family leave policy reflects specific paid family leave rates for 2018, then you might need to change those.

This is also an excellent opportunity for employers to review which employees are eligible to opt out of the paid family leave program. Employers must offer qualifying employees the chance to waive coverage (and corresponding paycheck deductions). However, the waiver automatically expires if the employee later becomes eligible for paid family leave.

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May 30, 2018

Vacation Pay in New York

Vacation pay is a typical employee benefit throughout the United States. In New York, however, like most states, employers do not have to give their employees paid vacation. Consequently, New York employers have discretion in how they structure their vacation benefits. But once they establish a vacation plan, employers must follow it.

Click here for some other items to review in your Employment Law Check Up.

New York Vacation Pay Law

Again, New York law does not require employers to give their employees vacation time. However, employers who offer paid vacation must notify employees of the applicable policy in writing.

Employers must follow their existing vacation pay policy. If, for example, the policy says that employees will receive unused vacation pay upon separation of employment, then the employer cannot withhold the vacation pay by arguing the employee engaged in misconduct. However, if the policy specifies that unused vacation time is forfeited upon termination, then employees do not have a right to a vacation payout. If the employer’s policy does not address separation of employment, or there is no written policy, then the Department of Labor will take the position that the employee is entitled to a payout of earned vacation time.

Generally, employers may revise their vacation pay policies. In doing so, employers should avoid taking away earned vacation time without adequate compensation.

Employees may also receive contractual rights to vacation pay through individual employment agreements or collective bargaining agreements. Employers may not be able to modify these easily.

Structuring Vacation Benefits

Employers take different approaches to paid vacation.

Some companies allow different numbers of weeks of vacation pay based on length of service. This often ranges from approximately one to four weeks per year. Eligibility may also vary between full- and part-time employees.

Some companies combine vacation and other forms of paid leave into one category—PTO, or paid time off. Employees receive a specified number of PTO days (or hours) to cover absences. This may include or be separate from sick leave.

There are also different accrual methods. Sometimes employees receive all of their annual allotment on the first day of the year. Under other systems, employees accrue vacation pay on a daily, weekly, monthly, or another basis.

Most employers require supervisor approval, ideally with reasonable notice by the employee. This helps avoid too many employees being on vacation at the same time.

Different methods work for different organizations. There is no one-size-fits-all “best” approach. This is one area where employment law, at least in New York, allows employers considerable flexibility to meet business needs.

Check Your Vacation Policy

Take this opportunity to review your organization’s vacation pay policy. Does it still meet your needs? Does it address what happens to vacation time when employment ends?

A well-designed vacation policy can improve employee morale while maintaining productivity. A weak policy can lead to workforce shortages or fatigued employees. Consider many factors, including past experience. If the current vacation pay policy isn’t producing the desired balance, then changes may be appropriate.

Experienced employment attorneys can assist in policy design. They can both offer alternatives that have worked in other organizations and edit policy language to help avoid unintended consequences.

February 8, 2018

Tax Reform Affects Sexual Harassment Settlements and Employee Benefits

On December 22, 2017, President Donald Trump signed sweeping tax reform legislation. The controversial tax bill includes many changes that directly affect the employment relationship. These range from sexual harassment settlements and paid family and medical leave to reimbursed employee expenses and retirement plans.

Although I am neither a tax lawyer, nor an accountant, I offer a synopsis of these changes here.

Tax Deductions for Sexual Harassment Settlements

In response to the ongoing #MeToo movement, Senator Bob Menendez (D-NJ) introduced a new provision to the Internal Revenue Code’s section on tax deductions for ordinary trade or business expenses. The provision prohibits deductions for:

any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement; or
attorney’s fees related to such a settlement or payment.

The tax reform bill doesn’t expand on the meanings of the terms used in this new provision. That leaves its application open for debate, at least until the IRS issues guidance and begins to apply the restriction to actual returns.

Clearly, this new tax code provision will affect settlements of employment claims. This may include both cases of an asserted claim involving sexual harassment or sexual abuse and those where the employer seeks a general release to cover all employment-related claims. In the latter scenario, the employee may not have specifically alleged sexual harassment/abuse. But a broad release would typically reference Title VII and similar state laws that could encompass sexual harassment claims. Employers (and employees) will need to weigh the trade-off between release coverage, confidentiality, and tax deductibility.

Employer Credit for Paid Family & Medical Leave

Employers can now claim a tax credit starting at 12.5% of wages paid to qualifying employees on family and medical leave. Wages paid must be at least 50% of the employee’s normal wages. The credit increases by 0.25% for each full percentage point by which the employer’s wage payment exceeds 50% of the employee’s normal wages, up to a maximum 25% credit.

To be eligible to take the credit, the employer must provide all qualifying full-time employees at least two weeks of paid family and medical leave each year under a written policy. The employer must also provide part-time employees leave on a pro-rata basis.

Qualifying employees are only those who have been employed for one year or more and whose wages do not exceed $72,000 (in 2018, indexed for inflation).

The credit is limited to 12 weeks of paid leave per employee in a tax year. It is only in place for 2018 and 2019 and does not apply to paid leave mandated by state or local law.

Certain Reimbursed Expenses No Longer Excluded from Employee Income

The 2017 tax reform bill repeals certain exclusions from employees’ taxable income. One such exclusion previously applied for certain moving expenses reimbursed by their employer. Another permitted employees to exclude up to $20 per month of qualified bicycle commuting expenses reimbursed by their employer. Under the new tax law, neither of these exclusions apply between January 1, 2018 and December 31, 2025. Subject to future Congressional action, these exclusions are scheduled to return in 2026.

The reforms also indefinitely eliminated employer deductions for certain transportation benefits provided to employees. Specifically, these deductions applied to up to $255 per month for employee mass transit commuting and parking and up to $20 per month in bicycle costs.

There are also changes to tax treatment of qualified equity grants to employees, employee achievement awards, and length of service award plans.

Retirement Plans

The tax changes also affect employer-sponsored defined contribution plans. It gives employees more time to roll over loan balances to an IRA following plan termination or separation from employment. Under the old rules, employees had 60 days to avoid having the loan treated as a distribution. They now have until the due date for filing that year’s tax return.

Other earlier drafts included additional changes that were ultimately dropped. These included reducing the age for beginning in-service distributions from defined benefit and state and local governmental plans to 59 1/2 and changing rules regarding hardship distributions.

Health Care

The new tax bill eliminates the penalty connected to the Affordable Care Act’s individual mandate as of 2019. The penalty still applies to individuals who haven’t maintained sufficient health insurance coverage in 2017 and 2018.

It also reduces the threshold for claiming itemized deductions for qualified medical expenses from 10% to 7.5% of income in 2017 and 2018. The 10% threshold returns in 2019.

Response to Employment-Related Tax Reform Issues

Most of these issues do not require employers to take action (other than paying taxes differently). However, because they will affect taxation of both the employing organization and the employees, questions are likely to arise. Proactive employers should consider the tax impacts and plan accordingly.

Businesses should seek further guidance from appropriate professionals in considering their approach in response to these developments. Often that will mean accounting or tax law professionals. But it will also include attorneys involved in settling disputes with employees, especially (but not only) those involving sexual harassment allegations. An experienced employment lawyer can also assist in preparing a credit-qualifying paid family and medical leave policy.

The IRS indicates that it will provide updates and resources about the new tax reforms here.