Important Reminders for the New Year
Although there are some exceptions, almost all hourly (non-exempt) employees in California must be paid the minimum wage as required by state law. Effective January 1, 2016, the minimum wage in California is $10.00 per hour.
Most employers in California are subject to both the federal and state minimum wage laws. Also, local entities (cities and counties) are allowed to enact minimum wage rates and several cities have recently adopted ordinances which establish a higher minimum wage rates for employees working within their local jurisdiction. The effect of this multiple coverage by different government sources is that when there are conflicting requirements in the laws, the employer must follow the stricter standard; that is, the one that is the most beneficial to the employee.
Thus, since California’s current law requires a higher minimum wage rate than does the federal law, all employers in California who are subject to both laws must pay the state minimum wage rate unless their employees are exempt under California law. Similarly, if a local entity (city or county) has adopted a higher minimum wage, employees must be paid the local wage where it is higher than the state or federal minimum wage rates.
Exempt Minimum Wage Update
Exempt employees in the administrative, executive or professional fields must be paid at least double the minimum hourly wage. Exempt employees must now earn an annual salary of at least $41,600 beginning January 1, 2016. It is up to employers to determine whether to classify an employee as exempt or non-exempt under the Fair Labor Standards Act (FLSA).
- It is imperative to understand that paying an employee the exempt minimum salary of $41,600 by itself will not qualify a position for exempt status. There are also duties and time-spent tests that must be met in order to qualify an employee for exempt status.
- If a position meets the testing standard for exempt status but is not compensated at the required exempt minimum salary, the position will revert to non-exempt status and overtime eligible.
Please contact your Centricity Solutions Account Manager if you are interested in an exempt/non-exempt analysis.
ACA Reporting Deadlines Have Been Extended
Good news from the federal government – the IRS announced on December 28 that Applicable Large Employers (ALEs) subject to the Affordable Care Act (ACA) reporting requirements have extended deadlines to file their required forms with the IRS. Even better, as a Centricity client, we will determine if your business is considered an ALE for ACA-reporting purposes – and will assume responsibility for all applicable filings on your behalf.
In order to properly complete the required filings, employees must update their family demographic information within the Centricity HR system. A brief memo provides details the simple steps required to update the (required) family demographic information within the Centricity HR system.
Here is a breakdown of forms ALEs are required to file and their new deadlines:
- ALEs have an additional two months to furnish Form 1095-C to full-time employees and covered individuals, extending the deadline to March 31, 2016.
- ALEs that file more than 250 of the 1095-C forms should also plan to file Form 1094-C and data electronically. The due date for filing this form electronically has been extended to June 30, 2016.
- For non-electronic filers, the deadline to file Form 1094-C with the IRS is now May 31, 2016.
Taxpayers generally will not be impacted by the extensions, even if they do not receive their forms prior to filing their individual tax returns. Most taxpayers will simply check a box on their tax returns to indicate they had coverage for the year and are not required to include Form 1095-C or Form 1095-B when filing their returns.
Centricity provides resources to help our ALE clients comply with the new reporting requirements. Contact Centricity for more information on our HR solutions for ACA compliance.
Centricity will be sending out Form W-2’s for the 2015 tax year during the last two weeks of January. Please remind your employees to update any address changes in Centricity’s HR system, as Form W-2’s will not be forwarded by the Post Office.
Tax notices for 2016 tax rates are now being sent out by many of the state taxing authorities. Please forward any & all employment tax notices you receive to Centricity as soon as possible to make certain payrolls are processed using the correct tax rate.
Health Savings Accounts (HSA)
If you offered a Health Savings Account (HSA) to your employees in 2015, the HSA vendor is responsible for providing year-end information for tax reporting. The HSA vendors are responsible for sending important account information directly to account holders for their tax planning and preparation. If you or your employees have not received this information, please contact your HSA vendor to find out how they are handling the tax reporting of HSA contributions.
HSA contribution limits have remained the same for employee-only coverage and have increased slightly for those with dependents. The 2016 limits are $3,350 for an individual and $6,750 for a family.
If you provided an Employer HSA contribution to your employees during 2015, this information will be reported on the employee Form W-2. However, employees should use the forms provided by the H S A vendor when filing their taxes.
2016 Holiday Schedule
It’s time to plan and publish your corporate holiday schedule for 2016. Please complete the Holiday Schedule Template and return to your Centricity Account Manager as soon as possible.
Please contact your Centricity Account Manager if you have any questions about any of these new year items. We look forward to being your resource throughout 2016 for any HR, Payroll, and Benefit needs.
Thank You and Happy New Year!