April 2014 Newsletter
In this issue:
- Supreme Court Says FICA Tax Due on Severance Pay
- DOL to Issue New Regulations on Exempt Status Employees
- Importance of Establishing a Distracted Driving Policy
- Survey Shows Employees Value Health Insurance More Than Higher Salaries
Overturning the Sixth Circuit, the Supreme Court declared on March 25, 2014 in US v. Quality Stores that lump sum severance payments made to laid-off employees are taxable wages for FICA purposes.
What the Supreme Court decision means for employers is that what had long been the case – severance pay is subject to FICA tax – remains the case. And for employees who are laid off, it means that they will continue to get a little less in "take-home" severance because their share of FICA tax has been taken out.
However, the Court does offer employers an alternative. They can get around paying FICA taxes on severance pay if it's structured in a certain way – employers fund a trust and employees get weekly payments tied to the receipt of state unemployment benefits.
For more information, please visit the Tax Insight from Washington National Tax Services.
On March 13, 2014, the White House announced that it was directing the DOL to issue new regulations on white collar exemptions, likely with the effect of making more workers eligible for overtime compensation.
These exemptions were last changed in 2004 and employ a primary duty test along with a minimum pay threshold of $455 per week ($23,660 per year). The FLSA, which governs overtime rules, does not specify these exemptions, which have evolved through DOL regulations. Therefore, DOL has broad discretion to change the regulations. The white collar exemption for executive, administrative, professional, outside sales and computer employee categories had not been on the DOL's regulatory agenda, which is published twice per year.
It is expected that the focus of the new rules will be on two areas:
- Raising the minimum pay threshold above $455 per week
- Requiring the primary duty to constitute a certain percentage of time worked (which would affect many supervisors in this age of multi-tasking)
However, don't expect the changes to take effect soon. The 2004 regulations were about two years in the making.
HRi will continue to monitor this issue and report on developments.
Distracted driving includes dialing or talking on a cell phone (even hands-free) and texting, emailing or accessing other smart phone or internet-based features. Yet most employers do not have a long-standing "distracted driving" policy but rather just a hands-free-mobile-device-use policy. They have made do with a common sense, unwritten policy of "drive safely" for many years. For an employer just now developing a new policy, the policy should be broad enough to cover all forms of distracted driving and not just limited to hands-free requirements. Most importantly, the policy should be practical and enforceable.
While what is "practical and enforceable" may vary by industry and the types of workplace driving that occur, you should require your employees to comply with any applicable state law. In addition, the policy should encourage employees not to engage in any form or distracted driving and offer basic alternatives like "pull over" or "wait until you get back to the office." The policy should clearly tell employees that you do not expect the employee to engage in work – other than safe driving while driving.
A national survey by Stony Brook University indicates that more Americans would prefer less pay as long as they get health coverage.
The survey, The Health Pulse of America, underscores how important medical benefits are when a person chooses a job. In telephone interviews with about 800 adults, researchers found that the benefits employees value most are:
- Comprehensive medical coverage
- More paid vacation time
Here are some of the results of the survey, conducted by Stony Brook's Center for Survey Research:
- 71% would take a lower salaried job with benefits
- 24% would take a higher paying job with no coverage
- 73% said good health care benefits are very important
- 66% said good retirement benefits are very important
Although many employees worry about the future of their health care plans, most indicated they are "generally satisfied" with their current health coverage and other benefits. In addition, well over half of Americans say they are extremely or very satisfied with health care quality. But only 18% say they are satisfied with the cost of health insurance (Employee Benefits Research Institute).
Respondents also overwhelmingly indicated that they are stressed at work, with more than 40% saying they believe increased paid vacation time would improve Americans' health.
Did You Know?