What Employers Need to Pay Attention to in 2024:
With the turn of the year behind us, Commonwealth Payroll & HR is offering a beacon of insight into the future employment complexities we can expect in 2024. Jeff Plakans, Founder and President of Commonwealth Payroll & HR will be joined by Mark Alaimo, Managing Shareholder at LCW Certified Public Accountants; Al Gray, Labor & Employment Attorney at the Law Office of Alfred A. Gray; Rebecca F. Alperin, Member & ERISA and Benefits Attorney at Morse; and Michelle Ferero, Partner and HR Executive at P&C Consulting, all uniting to guide you through the upcoming year.
Our joint presentation, “The Light in the Tunnel” will be an in-depth exploration of key topics employers need to consider for 2024. From addressing inevitable challenges to offering proactive strategies, our panel will equip you with valuable insights to stay ahead in the New Year. Together we’ll learn what that light at the end of the tunnel is and leave you with actionable takeaways for your to do list as an employer.
Co-Sponsors and Panelists:
Mark Alaimo | Managing Shareholder, LCW CPAs | Bio
Rebecca F. Alperin | Member, Morse | Bio
Michelle Ferero | Partner, P&C Consulting | Bio
This recording was presented live on January 23, 2024.
Good afternoon, and thank you for joining us today. I am Jeff Plakans. I’m the founder and president of Commonwealth, Payroll & HR, and we’re really excited to have you joining us for our presentation today, The Light in the Tunnel: What Employers Need to Pay Attention to in 2024. Before we get started, I just wanted to [00:00:30] make a few housekeeping notes. Hate to say that because everyone says that, but yes, we will be sending out an email after this that we’ll have both the deck and also a link to the recording of the presentation, both by me and of course by all of our panelists today. Next slide, please.
So we want to talk a little bit about what the light at the end of the tunnel is. Now, a poet, Robert [00:01:00] Lowell from Boston, I might add, said the light at the end of the tunnel is just the light of an oncoming train. And I think the pervasive attitude, especially when it comes to being an employer, regulation around employment, challenges around employment, that wouldn’t be more true than it is today here in 2024. So, we want to think about what we’re trying to get and what we’re trying to accomplish today. Next slide.
[00:01:30] So what we want to do today is we want to make sure for you as employers and advisors to employers, we get a good sense for what’s happening in ’24, what topics we need to focus on, and why we need to focus on them. We want to educate you. We want to make sure we get covered what you need to know and how it’s going to affect your business. That we give you actionable items, meaning what things you can do about it and what takeaways [00:02:00] you have, things that you can go and literally take action on that will help your outcome. And then finally, we determine, is that really an oncoming train or is it simply the other end of the tunnel. So moving forward, let’s go on to the next slide. I wanted to introduce our panel. Everybody, hop on if you can.
Cameras are coming up now. Excellent. Okay, so [00:02:30] the first person I would like to introduce is Michelle Ferero. Michelle, thanks for joining us. Could you introduce yourself, please?
Absolutely. Thanks, Jeff. My name is Michelle Ferero. I am a partner with P&C Consulting. We provide HR generalist support as well as HR business partnering with leaders and HR leaders for all aspects of modern-day people operations.
Awesome. [00:03:00] Thank you, Michelle. We’re also joined by Rebecca Alperin. Rebecca.
Hi everyone. I’m Rebecca Alperin. I’m a member at Morse Law Firm in Waltham. My practice specializes in the legal complexities associated with the design, implementation, and operation of employee benefit plans.
Excellent, thank you. Also joined by the venerable Al Gray. Al.
Al Gray: Good afternoon, everybody. [00:03:30] My name’s Al Gray. I am since, September the founder and owner of the Office of Alfred A. Gray. I have been practicing management-side labor to employment law for, because I hate to admit it, 30 years both in the Commonwealth, both for private firms, and now on my own. And look forward to chatting with you today.
Excellent. Thank you, Al. And finally, Mark Alaimo. Mark.
Thank you, Jeff. My name is Mark Alaimo. I’m the managing shareholder [00:04:00] of LCW CPAs. We’re a regional CPA firm specializing in working with closely-held businesses and their owners for all of their accounting needs. Thank you, Jeff.
Thank you. Well, thanks for joining us today, and thanks for everything that you’re going to bring to our presentation. We have a good cross-section of professionals here who come at these issues that we’re going to talk about from many different angles. We [00:04:30] will ask that… We know everyone’s going to have questions. Please use the questions section of your console for the webinar to submit questions. We’re going to attack the questions as a whole at the end of the session. That way we’ll benefit from not only having a question directed to one individual but also the benefit of the entire panel to answer the question.
So, feel free to mention in your question who you want to direct it to, but everybody’s going to get a shot at [00:05:00] talking a little bit about the subject. That’s what it’s going to make this colorful. Now, speaking of that… Next slide, please. We have a question of the day for our panelists, and so I surprise these guys with this question as we just were getting on, and I’m going to ask each of you a quick question. Have you ever had, and I can’t believe this is part of my job moment, and if you don’t mind care to share. Why don’t we start with Al?
[00:05:30] Gee, thanks. So I was thinking about this question and there was two things that came to mind. Probably the most interesting is, as a lawyer, I never thought I would have to serve as bodyguard. But I’ve had probably two occasions or so in my career where I’ve been actually in a court or court-like setting where people kind of got angry or upset as happens in employment situations. [00:06:00] And that couple of times almost went to blows and I had to step in and intervene probably because I’m 64250260 or so. That’s to my advantage, but I don’t think that necessarily comes under the job description of lawyer, but you got to do what you got to do.
Excellent. So dual purpose, lots of services provided. Thank you, Al. Appreciate it. Rebecca?
I can’t say that I have anything as exciting as that. [00:06:30] My practice is really rooted in the tax code, so I think some people would say it’s rather boring, but I guess the fact that I can cross over and be a consultant for employees as opposed to being a lawyer and help plan and put into place total compensation packages for individuals.
[00:07:00] All right, awesome. Well, thank you very much. Mark.
All right. So I’ll answer this in two ways. We have a closely held firm of about 42 people. We’ve owned our own building. This is not our own building, it’s a restored mill. But one that would always get to me is it would always happen to be on a day like today where I’m dressing like a grown-up and the walkways are not shoveled and we ran out of ice melts. So then I’m the guy in a suit [00:07:30] going to get ice melt and shovel because other people aren’t there and I don’t want a workman’s comp claim or I don’t need a more senior client of ours to slip and fall and me to deal with that problem. So that’s one side.
The more professional side is really being an unqualified therapist for our clients and all the attorneys, not their heads especially. I think we get the calls first because our billable rates are cheaper than most attorneys, [00:08:00] but it really does end up being… You focus as the therapist, the counsel, or the consul if you want to go the Italian route just for business owners and other clients that are looking for someone that they trust, whose opinion they respect to give them counsel in the moment for whatever they’re dealing with.
Excellent, awesome. Thank you. Michelle.
I will have to agree with Mark, [00:08:30] first off that they probably come to HR before they go to you and then go to the attorneys. But the one that came to mind for me specifically is a little bit more colorful. In my prior life when I was the head of HR for an in-house company, I was having a wonderful conversation with an employee, and as this employee wrapped up and was getting ready to leave the HR office, something fell out of his pocket. And so upon a quick little review, realized it was a baggie of cocaine. So [00:09:00] that was part of my job that day.
All right, geez. Well, I would be remiss if I didn’t share as well. I’ve been in this business a very long time since I was 16 years old, quite frankly. And so it’s been in my blood for a long, long, long, long time. And even to this day, it never ceases to amaze me that whenever we’re dealing and working with clients, inevitably we’re working and dealing with their employees. And I think in almost every single [00:09:30] case, I find myself still talking to employees, having to explain to them what the components of a paycheck are and where these taxes go that are being taken out of their check and everything that has to do with that. It’s kind of a sad state of our country in terms of financial literacy and how that all works. So it’s become a little bit of a pet project of mine, but for every single day we still have these conversations and no, I don’t mind doing [00:10:00] it, but boy, I wish I didn’t have to.
So all right. Moving right along. Well, Al is going to lead us off with his presentation today. So the rest of you can drop off of camera for a moment and don’t forget to mute. All right, so Al, go ahead and if you can lead us off on our employment update, Al told us a little bit about him just to get into a little bit more detail and why Al is on the call today. He is a wealth [00:10:30] of experience having been a partner at Rubin and Rudman, got at Bowditch and Dewey, worked at Greenberg Traurig. He obviously covers a lot of different employment law, a lot around work with the NLRB matters, but he also has a big practice in human services and really does a good job and sort of come up with a… I don’t know, it’s not a side hustle, but a good practice representing families that have a need for special education, [00:11:00] placement, and services. Did I miss anything, Al?
No, you pretty much just covered it. Beautiful.
I just wanted to take a slide out of your way. Let’s take it off to the present mash.
Thank you very much. Okay, so since I’m going to be talking about the law, there were quite a few changes, ed and the law, employment-wise that have just happened or about to happen. I’m going to run through these kind of quickly because I’ve only have 15 minutes. [00:11:30] If you have any questions or concerns, you can raise them during the question and answer period. Or if you need even more information, reach out to me directly because I believe you’ll have all of our contact information. So, starting with changes in the overtime thresholds. About two years ago, our esteemed former Boston Mayor and a former U.S Secretary of Labor Marty Walsh proclaimed that the minimum of salary for executives, professionals, and administrators with regards to overtime was too low. The Biden [00:12:00] administration has agreed and said that it was looking to restore economic security and extend overtime protections for an estimated 3.6 million salaried workers. Next slide, please.
The Department of Labor has proposed changing the overtime thresholds currently for executives, administrators, and anybody. For anybody that’s making under $684 a week or $35- [00:12:30] plus thousand, they’re entitled to get overtime. They’re changing that dramatically or propose to change that dramatically to $1,059 per week or $55,000 per year. So anybody under those thresholds would be entitled to receive overtime pay if they’re working in excess of 40 hours. We also want to change the highly compensated individual definition from, as you can see on the screen, from 107-plus thousand [00:13:00] to a 143-plus thousand. An interesting tidbit that in the proposal is that it’ll automatically have increases to these thresholds every three years. Next slide, please.
So the positives, if you want to consider positives, more executives, administrators, and professionals will be entitled to receive overtime. They’ll get appropriate compensation for some of them will get appropriate compensation for the long hours of [00:13:30] work. The negative, obviously the big negative for employers is going to be the extra cost to end up having to pay this all out. So that’s pretty self-explanatory as to what some of the changes are with the overtime thresholds. Next slide, please. Pay Transparency Law. This is an issue that is creeping its way around the country where a lot of states are looking into or already have Pay [00:14:00] Transparency Law. We already have here in Massachusetts an Equal Pay Act, which prohibits asking applicants on what their current salary is or what their salary history is. The transparency law goes a bit further trying to get everybody on the same level as far as pay is concerned or pay equities.
The current legislative proposal will require employees who disclose in job postings what the salary range is going to be, and those postings, whether [00:14:30] internal, external, or via third party, you’ll be required to do this if you have 25 or more employees. If an employer is headquartered outside of Massachusetts if they have 25 or more employees within the state or within the Commonwealth, they will also have to be required to provide the salary ranges at posting or as well as if individuals are applying for promotions or transfers, they’re entitled to receive [00:15:00] or they need to receive the salary range for the positions that they’re being considered for.
There’s an additional core requirement, at least under the Massachusetts transparency law proposal for employers of over a hundred employees that in addition to providing information to the individual, it’ll be required to provide wage data to the Commonwealth. What that data is going to be is not known at this particular point, but it’s coming down the pipe. [00:15:30] As I said, this is a law that is sweeping the country. This slide shows that other places that have it or have at least around us in New England area, interestingly in New York, first New York City, Westchester County, New York, and Ithaca, New York. First class, such a law in 2022, the entire state’s law on pay transparency becomes or became effective September 17th of this past year. [00:16:00] Where in Massachusetts it applies to more employers in one of 25 employees, in New York it applies to employers with four or more employees.
Connecticut and Rhode Island also already have provisions, and mostly what their requirements are is that you have to provide the salary information upon an employee’s request. As of the moment, at least not that I could find it because I was [00:16:30] not able to see anything in New Hampshire, Maine, or Vermont. As I said, I’m kind of going through these quick just to cover some things quickly, give you a flavor of what’s going on. If you have more detailed questions, ask me now. This next one, there’s always something going on with the independent contractor rule. This one is big and you’re going to hear a lot about [00:17:00] this. So the Biden administration has proposed a new independent rule, which is going to have huge consequences. It’s supposed to take effect March 2024. I got a sneaking suspicion for reasons I’ll say in a few minutes, that it’s going to be delayed.
The rule all addresses the ongoing debate between, whether certain classes of individuals are employees or independent contractors. So [00:17:30] this particular change is going to focus on saying that anybody that is economically dependent on a company, they’re going to be considered an employee. So what does that mean? So let’s take an Uber driver. Uber drivers right now are independent contractors, but an Uber driver, when they’re driving, they have to adhere to Uber’s rules, regulations, et cetera, et cetera. They can decide when they [00:18:00] want to work, how many hours they want to work, et cetera, et cetera.
But by having to follow their rules, that would fall under this definition of economically dependent, which means… Next slide, please. Which means that… Yeah, thank you. That this new provision is going to have a huge impact on such contract workers such as Uber workers, Lyft workers, and DoorDash workers. [00:18:30] Former President Trump, like him or love or not, whichever your claim to be is, his version of the regulation with regards to workers was if workers could work on a… If they own their own business or have their ability to work for competing drivers, such as a lot of Uber drivers also work for Lyft or vice versa, they can continue to be treated as contractors. This new provision will not allow that.
[00:19:00] And most app service individuals or most app service drivers or not, they don’t want this. They may want some additional benefits, but they don’t want to be employees. They want to have the freedom to be able to do what they want to do. I was at a conference, oh, maybe a little over a year ago in Washington, and this issue came up and I actually asked my Uber driver on the way back to the airport, it’s like, “Hey, do you want to be an employee or an independent contractor?” He says, “No way do I want to be an employee. “So they don’t want it. [00:19:30] Next slide, please.
So challenges are to be expected. There’s already some individuals in Georgia, some freelance writers who have filed litigation, claiming new proposal is unconstitutional. In the past when this issue has come up, Uber, Lyft, and DoorDash has spent hundreds, and I mean hundreds of thousands and dollars to maintain the status quo. Because think of the converse, if all of a sudden Uber, Lyft, and DoorDash [00:20:00] have to treat their workers as employees, that’s going to be a huge cost to them. So I expect that big organizations like this are going to fight it again. So stay tuned as to whether or not this is going to pass or not.
Next issue I want to quickly talk about is non-competes. People are always asking, “Are non-competes enforceable? Are they prohibited or whatever?” I was [00:20:30] actually surprised when I was researching for this that there are only four states that outright prohibit non-competes probably as everybody could predict. One is California, second South Dakota, Oklahoma, and Minnesota as of July 1st of last year. So technically on paper, Massachusetts non-competes are permitted, but in reality, in my view, it’s disappearing. Next slide, please. [00:21:00] As with any provision for non-competes, Massachusetts has certain requirements in order for a non-compete provision to be effective or to be enforceable. It’s got to be clear language. The employee specifically must be advised of a right to seek counsel.
A lot of times as we’ll see, or some of you are in the human resources world, you may see a separation agreement, severance agreement, whatever you want to call it, that somewhere [00:21:30] in the agreement, there’s probably some reference to an individual’s right to seek counsel. If you have a non-compete provision, this right to seek counsel must be with that provision not elsewhere in the agreement. But the biggest issue with non-competes, particularly here in Massachusetts, is that in order to be enforceable, there’s what’s called the garden lead provision. Now, the garden lead provision states that for any period of time [00:22:00] that a person has the restrictive covenant of not being able to compete, you must pay at least 50% of that person’s salary for that time period. So as you can see on the page, an example, making it simple, if an employee is making $100,000 per year, you let them go and you want them not to compete for a year, you have to pay them at least $50,000 during that restrictive period. Most employers are not going to want to do that.
[00:22:30] So since they’re not going to want to do that, the effect is that in Massachusetts, the non-compete portion of non-compete agreements is disappearing. Non-solicits and confidentiality protections, trademark protections, all that stuff is still in play. Next slide, please. This is just a quick thing. You can look at it later when you get the deck surrounding states of New England [00:23:00] states of whether non-competes agree are in play and what the restrictions are. So moving away from usual pay issues and non-compete issues or whatever. I thought about this issue, social justice attire at work, and I thought about it because of an issue that came up with one of my clients.
And I’ll tell you what happened recently. This was about a month ago. It was a school, happened to be a school that provides services to individuals with disabilities. The [00:23:30] teacher’s aide walked into the classroom, took off his sweater, and he had on the free Palestine t-shirt. The teacher was an Israeli or from an Israeli background. She freaked out, she was upset, threw him out of the class, wouldn’t let him be in. So then this guy was like, “This is free speech. I should be able to wear what I want to wear, et cetera, et cetera.” So I pose the [00:24:00] question to you all, I wish you could answer or you may be able.
… question to you all I wish you could answer or you may be able to comment later, is T-shirts like this, Free Palestine, Black Lives Matter was big for a while, now we’re into the political scene, Trump or Nikki Haley or Biden type shirts, are these type of clothing or attire acceptable in the workplace?
Next slide, please. This is going to continue to happen I think with the climate that is [00:24:30] going on. So I think there’s some things to consider. There’s a lot of different discussion about what is good? What is bad? But one of the things you have to look at, people that are HR people, you have to look at, is somebody coming to work with a Free Palestine T-shirt? Could that create or does it create a hostile work environment? And I think one of the things that you have to look at is, what is the purpose of these various organizations? [00:25:00] Some people may agree the Black Lives Matter initiatives were supporting the nonviolence by police officers in the African-American community. If you go online and see, what is the Free Palestine initiative all about? Kill all Israelis. A little hostile, so probably inappropriate, but how do you say arguably Black Lives Matter attire is okay, Free Palestine is not okay? Trump is [00:25:30] okay, Biden is not okay? How do you make the distinction?
Well, one way to avoid the distinction is, tighten up your dress code policy. Put in your dress code policy. Basically, nothing is allowed. Then there can be no interpretation figuring out what is right, what is wrong, what is the socially acceptable practice at the time? So I thought I’d throw this one in because I think it’s going to continue to be a hot topic. [00:26:00] Maybe not so much now with T-shirts in the winter, but as we get to warmer weather, we start seeing some of it again. That’s fast and furious. That’s all I have for the moment, so thank you very much.
Thank you, Al. Appreciate it. As always, very insightful. And you were briefer than I thought, so thank you.
I spoke fast. I went through it quick. I looked at my watch. I [00:26:30] didn’t see your face, so, “Oh, I guess I have time.” But I wanted to get it all in. Hopefully, it wasn’t too fast.
Well, excellent. Thank you for all of the information and hopefully our audience will be able to do quite a bit with it. Again, Al alluded to this, you will be getting a recording and a copy of the deck at the end of the session. We’re going to move on now to Michelle Ferero. Michelle’s going to talk about employee work flexibility. [00:27:00] Next slide, please. A little bit about Michelle. She’s a highly accomplished HR person. Been in a number of different significant roles. You can see here Hitachi Cable, Consigli Building Group, and, obviously, the Middlesex District Attorney’s Office. Michelle has recently joined as a partner P&C Consulting, a group that we at Commonwealth have done quite a bit [00:27:30] with, and hats off to them. Michelle’s going to talk to us about work flexibility, something I think that’s on everybody’s mind and everybody’s tongues these days. So Michelle, the floor is yours.
Thank you, Jeff, and thank you as well to Al. That was some great hot topics that I know are very pertinent in the HR world right now. So quite helpful. All right, so work flexibility. I know this is a topic that is on everyone’s mind, [00:28:00] like Jeff had alluded to. So I wanted to start off by just talking about what work flexibility is and I think the biggest misconception that I want to kick this off with is that work flexibility does not just mean remote or hybrid work. Essentially, what it means is that it’s giving your employees some level of freedom to choose when, where, and how they perform their work with the caveat that it is aligned with the organizational goals and needs [00:28:30] and business requirements. So it really is a two-way street.
A couple of examples that are standard for work flexibility considerations. Our 4/10 work schedule, non-traditional start and end times, swing shifts, naturally hybrid and remote are under that category, but not only the option, and then also job sharing. And the way I like to share with people how I try to think of work flexibility [00:29:00] is that it’s any creative way to avoid a one fits all mentality at work since the workplace is made up of humans and we all know humans are different from one to the next. A couple of important things to share work flexibility. It’s been around. It’s been a hot topic on people’s mind for a long time. And if you just go back to that other slide for one second please. Thank you. So this graph that you’ll see, this was actually from a [00:29:30] survey that was conducted in 2019. So before the pandemic. And when individuals were asked, and specifically they zeroed in on working parents, they said that 84% would prefer work flexibility over a higher salary.
So it’s important to keep that in mind since this has always been a hot topic for employees, especially working parents, and the pandemic really did exacerbate things. Next slide, please. [00:30:00] So what brought us here and why is this such an important topic and why is this something that we really should be looking at in the tunnel? The pandemic, I know everyone’s sick of talking about it, but unfortunately there are still those leftover items we need to talk about. Before the pandemic, while work flexibility was on the minds of employees, it was important to them, it really was limited in terms of how it was handled. And it was handled on a case by [00:30:30] case basis, if at all, by most employers. The pandemic comes around and suddenly it’s not only a requirement in order for businesses to stay in business, but it also really made employees reevaluate their priorities.
People started wondering if they wanted to be, in their eyes, sacrificing as much of their time to work as they had in the past. They’re suddenly gaining bargaining power since they see that they can work [00:31:00] a little bit differently than we’ve always historically believed they could work. So then you fast-forward to present day and another important thing that’s coming into play this year in 2024 is that Gen Z, which is the generation born between 1997 and 2012, basically, there’s different reports as to what that generation is, but that’s the standard timeframe, they’re expected this year to overtake baby boomers in the workplace. [00:31:30] And that’s naturally going to have a ripple effect on how we operate, what the expectations of employees are, and it’s important to look at what those expectations will be.
A Fiverr survey essentially has recently found that work flexibility is a non-negotiable for Gen Z. They value flexible jobs because they equate it directly to living a healthy lifestyle. A lot of times people will refer to it as work-life balance. I like to refer to it as work- [00:32:00] life integration, and that’s what Gen Z really does want. They want to be able to have their work and have their personal life and be able to tackle it all. Interestingly enough, the survey also found that, ironically, Gen Z prefers in-person work interaction. So for employers, especially brick and mortar or onsite industries that you can’t do a lot of remote and hybrid work, [00:32:30] I think this is really a positive thing to keep in mind, that as long as you’re making your onsite interactions valuable, that’s what Gen Z wants. They may just want flexibility in another form, and that’s where those other examples come into play.
And the last important thing I wanted to share that I thought was interesting from the survey is that 76% of those Gen Zers that were surveyed, they believe they could complete their work in a four-day work week, [00:33:00] which is interesting, especially as I know that certain states right now are exploring having the government be involved in that four-day work week. So a couple of important notes to keep in mind. Next slide, please. Why is this so important in addition to what we just talked about? A few more statistics of surveys and research that’s been done on this topic. For employers who have implemented some version of workplace flexibility, [00:33:30] HR leaders are seeing a 60% increase being reported from managers, leaders, and employees themselves in overall productivity because of this. That is due in part to employee motivation, their engagement, employees feeling less stressed and happier at work.
Specifically one study found that 78% of individuals with workplace flexibility, they feel that they’re living a healthier [00:34:00] life and 86% of them are less stressed. When you take all of that into account, it really does create a culture and a work environment where productivity for the bottom line can be at an all time high. Now, with that, something I always like to bring up is a term that in HR, anyone who’s in the HR world, they know. It may not be as commonplace for everyone, but it’s called being an employer of choice. [00:34:30] And basically what that means is that your workplace is one that individuals seek out to work at. You have such a great reputation in terms of your culture that you don’t have to proactively try and find employees. They’re coming to you because they want to work for you. And one of the organizations I always like to highlight that they’ve done a lot of research and studies on since they’ve done this pretty well is the TJX Company.
Now, granted, [00:35:00] I might just like that specifically because I enjoy shopping at Home Goods and Marshalls and T.J. Maxx, but in general they’ve really figured it out how to be an employer of choice. They have people who seek them out, want to work for them, whether it be their main office, their stores, their manufacturing and distribution centers. They know what they need to do to make it so that their recruitment efforts are seamless and generally pretty easy. Next slide, please. [00:35:30] So implementing and maintaining flexibility, this is usually where a lot of people get hung up on, where do we start? One of the things I’d love to have everyone take away with them is assess your workplace first. Naturally, one size does not fit all in terms of flexibility for the different industries and different workplaces out there.
So if you’re considering this, really assess all the jobs. [00:36:00] Start thinking creatively about what can you do with some jobs and what jobs are off the table in terms of flexibility because it would not be realistic for your business goals and priorities? Then, or before then even, partner with HR right from the onset. Talk to them. Talk to them about what their thoughts are, what they’re hearing from employees, what they’re seeing in the industry that you’re in so they can give you some examples of what might work. [00:36:30] Involve your employees, send out surveys, have discussions, brainstorm about what employees want that are specific to your company and your industry. Just because you ask people for their input doesn’t mean you’re going to necessarily implement everything. That’s impossible.
But people love to be heard and you’ll get a lot of input from your employees and you might be surprised at how realistic what their version of workplace flexibility looks like. [00:37:00] The next piece, I spent a lot of my time in my HR career focusing on construction and manufacturing. So I truly, truly feel the pain of those types of industries when a topic like workplace flexibility comes up. Really try to get creative even with things that I haven’t maybe put on this list. Think about how you can maybe meet the employees halfway in terms of flexibility that will [00:37:30] work for you and work for them, but obviously not completely disrupt your industry. And last but not least, and this is the one that I think personally is very, very critical, leadership engagement and adaptability is going to be the core piece of success.
If your managers, your frontline managers, your senior managers, your leadership team, if they are not really truly bought into this and rowing [00:38:00] in the same direction when you roll this out and they’re able to pivot and see what’s working and not working in real time, you’ll be set up for failure from day one. So really make sure that you are setting your leadership team up for success by making sure they understand what this is going to look like for your specific company. Next slide, please. And another key takeaway, before you even explore workplace [00:38:30] flexibility, I like to stress to everyone that it’s important for you to know what your employer brand is. Now, every single company has an employer brand, deliberately or not, and your employer brand is what’s going to really impact which people and culture initiative is going to be important to you.
There’s no right brand, there’s no wrong brand, but it exists. So if you’ve decided that you want to be an employer of choice and your employer [00:39:00] brand supports that, work flexibility is probably going to be for you. If you’ve decided that work flexibility is not something that you can support for various reasons, that’s okay too. But the biggest thing I see that people unintentionally get tied up on is they’ll say they want to be able to implement work flexibility and then they can’t and what they’re wanting to do and saying is in direct conflict with their brand. And sadly, [00:39:30] that then shows people that are working for you that there’s a contradiction that exists and then you lose trust and faith in your employees. So know what it is, know what you want to be in terms of an employer, and then let that guide your decisions. Next slide, please.
Assuming that you do want to go to the route of a flexible work environment, here’s some key takeaways for you. Make sure that your leaders are set [00:40:00] up for success. There’s a couple of ways that you can do that in terms of one-on-ones and regular open dialogue with team members. And then, also, like I alluded to before, talk to your employees, ask them what they want, see what flexibility means to them, and don’t be afraid to pivot if things aren’t working and try something new. And that’s it.
All right, Michelle. Thank you very much. Hey, this is a big topic for a lot of employers. Do you find that there’s a lot of employers [00:40:30] that are blissfully unaware how important this is to their employees?
Absolutely. Absolutely. I’m glad you say that. That’s why I included so many stats and metrics. I know that’s important to leaders.
Well, if you’re out there in the ether or watching this and recognize that that’s a challenge, please go ahead and fire some questions into the chat on some good places to start. Again, reminder, you will be getting the deck. You [00:41:00] will be getting a recording to this. So we’re going to hit all of your questions again as we get towards the end. So Michelle, thank you very much. We’re going to bring up Rebecca. All right, Rebecca, she’s going to give us the ’24 Employee Benefits Update. Now, she didn’t call herself this, but Rebecca is what’s commonly known also as an ERISA attorney. Most people glaze over when they hear the words ERISA. Basically, what it means, [00:41:30] there’s attorneys that are out there to make sure that your benefit plans are fair. And Rebecca, can you talk a little bit about your practice, the different components of it?
I will, yeah. That’s actually the beginning of the presentation because I feel that it’s important for everyone to be on the same page.
So why don’t I just dive right in? First of all, I just want to thank you, Jeff, for inviting me. And [00:42:00] if we can then just skip to slide number 34. You’ll get these slides. So this just tells you about my background. The next slide tells you [inaudible 00:42:11].
Jeff Plakans: I don’t think that slide is in here, Rebecca, the one about [inaudible 00:42:15] executive comp. That’s why I asked the question.
Okay. I’m still going to get to it.
Okay. Great. The floor is yours then.
Perfect. So briefly, [00:42:30] my practice focuses on, as I said earlier, the legal complexities associated with the design, implementation, and operation of employee benefit plans. In a nutshell, my practice is broken down into compliance, transactional, and executive compensation. Can you go to the next slide, please? And one more. So today I just want to cover so that [00:43:00] we’re all on the same page a little bit of background, what are employee benefits? Again, what’s new for 2024? And then my practice crosses over into Al’s area of employment law, and I’ll discuss where I cross over, and the state law, I call them state law corollaries to the federal law regulations, which I typically deal with. Next slide, please.
[00:43:30] I said that my practice focuses on employee benefits so let’s start by defining, what are employee benefits? Employee benefits are employee compensation packages that include extras such as health insurance, retirement savings plans, paid vacation days, and more. And employers offer employee benefits typically to attract and retain top talent as well as improve [00:44:00] employee productivity and engagement. These are important because studies have shown that employees who feel valued and appreciated by their employer are more likely to stay with the company and be productive. And, of course, some benefits are required by law. So when we talk about employee benefits, we’re referring to health and welfare plans, qualified retirement plans, non-qualified plans, supplemental retirement plans that do not have the [00:44:30] same protections as qualified plans, deferred compensation, equity incentive plans, stock options, fringe benefits, paid time off, gym memberships, transit benefits, and the like.
So it does encompass a broad range of plans. If you could go to the next slide, please. When we talk about health and welfare plans, you can see here that under the umbrella of health and welfare, we’re talking medical, dental, [00:45:00] vision, psychiatric, long-term. Some things that people don’t typically think of as falling under health and welfare are severance benefits, vacations and holiday benefits, tuition assistance, daycare, housing subsidies, and post-employment benefits such as salary continuation or supplemental unemployment benefits. Next slide, please. [00:45:30] This slide is included for your reference, and it’s a glossary of some of the more frequently used terms relating to health plans. For example, the Affordable Care Act, which dictates the minimum level of coverage an employer has to provide to avoid having to pay a penalty to the IRS.
People commonly refer to this as Pay or Play. Only those employers with 50 or more full-time employees [00:46:00] or full-time equivalent employees or applicable large employers have to comply with the Affordable Care Act. Employers choosing to offer health insurance to their employees can either purchase health insurance through an insurance company, these plans are referred to as fully insured plans, or, alternatively, the employer can take on all the risk and pay the health claims of its employees out of pocket. And this is referred to as a self- [00:46:30] funded health plan. And then to mitigate the cost of high claims, self-funded employers can purchase stop-loss insurance. Next slide, please.
When we cross over to qualified retirement plans, there’s typically two types of plans that we think of, defined benefit plans, which promise a specific amount of benefit as at retirement, so for example, 1% of average [00:47:00] salary for the last five years of employment for every year of service with the employer, or a defined contribution plan, which does not promise a specific amount of benefit at retirement, individuals or participants have individual accounts, and the employee or the employer or both contribute to the employee’s individual account under the plan. Next slide, please. Employee benefits [00:47:30] are governed by the Internal Revenue Code, which generally sets forth the requirements for tax qualified status, and ERISA, which is the Employee Retirement Income Security Act of 1974, which I’ll just throw out, turns 50 this year, so ERISA attorneys are getting excited about having a birthday party for a statute. I guess that should have been my answer to Jeff’s question. I never thought that I would be throwing a birthday party for [00:48:00] a regulation. And ERISA covers the…
Rebecca Alperin: …a regulation. And ERISA covers the fiduciary requirements, the reporting and disclosure obligations. And you can see on this slide that the types of plans that we’ve talked about define benefit, define contribution. And health and welfare plans are governed by both the Internal Revenue Code and ERISA. Next slide, please. So generally, a plan that is subject to the requirements of the code must comply with one [00:48:30] or more of these requirements. We don’t have time to go into this today, but in order to be a qualified plan, the IRN to be able to either put money away on a pre-tax basis or pay for your health insurance on a pre-tax basis, the Internal Revenue Code says that you have to comply with certain requirements. And with all these requirements… Next slide please, you can imagine [00:49:00] that mistakes are common.
Mistakes fall into two categories. There’s operational defects, which are a failure to operate the plan in accordance with its terms. And qualification failures, the plan does not contain the requisite language to be compliant. We talked about health and welfare plans. Next slide, please. A section 125 plan is a plan defined under section 125 [00:49:30] with a code, that enables employees to take a taxable portion of their total compensation such as their cash salary and receive it as a qualified benefit on a pre-tax basis. So I take my salary, I say I want to pay my premiums for my health insurance on a pre-tax basis. This has to comply with both the Internal Revenue Code and ERISA. [00:50:00] And the reason I point this out is this is a very typical error that occurs, because the important thing to keep in mind is that without a section 125 plan or a compliant 125 plan, or at least without a premium only plan, a participant really is not able to pay for their health and welfare benefits on a pre-tax basis. Next slide please.
So what I’ve done here is I’ve listed [00:50:30] out the requirements for a 125 plan. And again, to receive it as a qualified benefit, you have to comply with all of these requirements. It has to be a written plan. The plan has to provide for a benefit, can be offered only to employees. The elections an employee makes must generally be irrevocable for the plan year. And the plan must be subject to non-discrimination testing. In my practice, I advise clients on errors with respect to their [00:51:00] qualified plans, 401k and health and welfare plans. And lately I’ve been seeing a lot of companies that do not have a written premium only plan. And if they do, they have not been conducting their annual non-discrimination testing. So why does this concern me? Because the IRS says that all premiums paid to date on a pre-tax basis are inappropriate. And that the income was actually taxable income to [00:51:30] the employee and the benefits were paid for on an after-tax basis. So if the IRS came in and actually imposed or disqualified your payment, that would be the effect. Next slide please.
As I mentioned earlier, ERISA governs the fiduciary requirements and reporting and disclosure [00:52:00] obligations. Again, these requirements are identified here. We don’t have time to go into them. Next slide. One requirement which I’ll just touch on briefly, is that every plan must have a named fiduciary. If there is no named fiduciary, then the plan sponsor is the named fiduciary. Fiduciaries are the people who are responsible for managing the plan or the plan assets. They have discretionary authority or control [00:52:30] over a plan’s investments or administration, or they provide investment advice for a fee. Next slide please. Fiduciaries have personal liability to the plan for loss and there is joint and several liability. Next slide, please. And again, with all these requirements you can imagine that mistakes are common. Under ERISA mistakes fall into two general categories, reporting and disclosure mistakes [00:53:00] and fiduciary breach.
Next slide please. This slide is just in here for your information. It just identifies who the plan administrator is, the TPA and the record keeper. Next slide please. So the best protection for fiduciaries is to document, document, document, document the rationale for every decision and the research conducted, the experts hired, et cetera, [00:53:30] to support every decision. Remember, fiduciary decisions are not judged with hindsight. They’re judged based on the prudence of the action taken at the time the decision is made. So action items for 2024 are to review your internal policies and procedures. And to the extent you do not have any of the items listed here, you want to put in place robust governance practices and comprehensive operational compliance procedures, [00:54:00] that provide evidence of a thorough investigation and an independent validation of procedural and substantive process standards that demonstrate that the fiduciaries have acted in a prudent manner.
Next slide please. So we’ve talked about the errors under both qualified retirement plans and health and welfare plans. One type of error that arises is exceeding the IRS maximum contribution limits or excess [00:54:30] contributions. So I’ve put this slide in here to show the 2024 contribution limits. Plan participants should have been made aware of the new limits and systems should have been put in place to notify employees if they are in danger of contributing too much. Next slide please. So the light in the tunnel that Jeff referred to initially was probably the train [00:55:00] that hit most of you when Secure 2.0 was announced. With its 90 plus regulations and lack of guidance, Secure 2.0 created confusion on how and when to operationally comply and when to formally amend plans. You must operationally comply based on the stated effective date. And the time to amend your plans for compliance with [00:55:30] the Secure Act and Secure 2.0 has been extended to the end of the 2025 plan year.
But remember, you still must operationally comply with any of those requirements that are in effect before you have to formally amend. So currently in effect as of 2023, the minimum distribution age has been increased to age 73 and will be increased again in 2032. Employer matching and [00:56:00] non-elective contributions may be made as Roth contributions, taxable at the time when they are made but not at distribution. And employers may provide de minimis incentives such as a low dollar gift card to improve plan participation. Next slide. Undoubtedly, you heard a lot last year about catch-up contributions for participants with wages in excess of $145,000. And how they can [00:56:30] only be made on an after tax basis or a Roth basis. This created quite a stir with plan administrators wondering how this was going to be administered?
Well, we don’t have to worry about this until January 1st of 2026, so we have a little bit of time. And for plan year 2025, there’s going to be a second tier increase in catch-up contributions. For participants who turn age [00:57:00] 60 to 63 during the tax year, they can increase their catch-up contribution to the greater of $10,000 or 150% of the regular catch-up contribution. Next slide please. So I’ve told you what’s coming down the pike in the next two years. What about 2024? Employers may make matching contributions to 401k, [00:57:30] 403B or 45 B and simple IRA plans for the benefit of employees who make student loan repayments. In other words, employers can count an employee’s student loan repayment in lieu of an elective deferral to the plan and make a matching contribution on that payment.
The second thing to note in 2024 is that non-highly compensated employees may fund an [00:58:00] emergency savings account with Roth contributions up to $2,500, and be permitted to take at least one withdrawal per month. And a plan may elect to auto enroll at a 3% contribution amount. Next slide please. Lastly, 2024 is the first year that permanent part-time employees are able to enter the plan. So let’s dive into long-term part-time employees. [00:58:30] Next slide please. Qualified retirement plans may not as a plan term exclude employees from eligibility based on part-time status. However, the code does allow 401k plans to exclude employees from eligibility until they have worked at least 1000 hours in a year. Many 401k plans have utilized this role to exclude employees who work less than that. For example, part-time employees [00:59:00] from all participation including the ability to make their own salary deferral contributions. So the Secure Act significantly altered this and created a category of employee, the long-term part-time employee.
So beginning this year under the Secure Act, 401k plans are required to permit part-time employees who perform work for at least 500 hours of service over three [00:59:30] consecutive years to contribute to a 401k plan. Secure 2.0 expanded part-time employee eligibility even further, providing that employees who work for at least 500 hours of service over two consecutive years must be eligible to contribute to a 401k plan beginning in 2025. And employees who meet these eligibility standards are referred to as long-term part-time employees. [01:00:00] I do not have time to go through the specifics, but please feel free to reach out if you have any questions. Let’s jump to the next slide. This is… I’m sorry, go to the previous slide. Yes. This is where there’s a fine line between benefits and employment. And this is with the Consolidated Omnibus Budget Reconciliation Act or COBRA, [01:00:30] which generally requires employers with 20 or more employees and that’s determined on a control group basis. Who sponsor group health plans to offer employees their spouses and their dependents a temporary period of continued healthcare coverage if they lose coverage through their employer’s plan.
Since federal COBRA’s passage, states have enacted similar laws to allow employees who do not qualify under federal COBRA to obtain continuation of coverage benefits. [01:01:00] The rules for state continuation vary significantly from one state to the next. And what I’ve done here is I’ve summarized the local states in our area and what their mini COBRA requirements are. Next slide please. And today in the United States, there’s no US federal law that provides a right [01:01:30] to paid family or medical leave. Family, medical leave guarantees job protected unpaid time off to eligible workers for qualifying reasons such as bonding with a new child, recovering from one’s own illness or caring for a seriously ill loved one. And is applicable to employers with 50 or more employees or smaller employees that choose to participate. [01:02:00] In the absence of a federal policy, states have enacted paid family leave, sick time and paid time off policies. In total, 22 states have adopted mandatory paid leave systems, state leave laws different… Next slide please.
These are the components of paid leaves at the state level. I’m going to blow through these here. [01:02:30] The next slide, please. This in here is for your reference. This shows you which states have mandatory, which are active, which states have adopted but are not yet active and voluntary paid leave programs. Next slide please. Again, this goes into a little more detail about some of the features of paid leave, parental, [01:03:00] family caregiving, personal medical, military care and safety leave. And then if you are looking for specifics, the next two slides go into more detail about the New England states, including New York and Connecticut as to what the requirements are. So for example, Massachusetts, all employers have the option [01:03:30] to top off their paid family medical leave wage replacement benefits with available accrued paid leave, to receive up to 100% of wage replacement during the PFML qualified leave.
To wrap up, I said we’re going to cover state retirement plans, we don’t have time. So a quick overview is that more than 30 states have considered enacting or have enacted state mandated retirement plan legislation, [01:04:00] including Connecticut, Maine, Massachusetts, New York, Rhode Island, and Vermont. For example, Massachusetts has the mass defined contribution core plan, which is a voluntary multiple employer 401k retirement program for nonprofits with 20 employees or less. It’s designed to help eligible employers provide their employees with savings opportunities that are cost-effective and easy to manage, can have up to a 6% auto enrollment [01:04:30] after 60 days with auto escalation. New York has the New York State Secure Choice Savings Program. The slide that’s showing now is when you should call your ERISA or employee benefits attorney for help. I know that was a whirlwind presentation, but thank you for being patient with me and we’ll field questions at the end.
And we have quite a few already, Rebecca, so we will hit them at the end. But thank you so much for everything. [01:05:00] She just covered probably what could be at an entire presentation in its own. I’m guessing you do that presentation, but an hour and a half’s worth no problem. So Rebecca, thank you very much. We’ll see you at the end of the presentation. Very, very insightful. And like I said, we got a lot of questions coming your way so we’ll be prepared for that. Moving right along, last but certainly not least we have Mark Alaimo. Mark of course [01:05:30] is an accountant, a CPA, the managing partner at LCW. And he knows a lot of things about a lot of things. Now, without getting into too much detail, much of what you hear and have already heard from some of our other presenters are all going to be rounded out by Mark and what his team does over at LCW, making sure that the Ts are crossed and that the is are dotted.
[01:06:00] And at the end between he and Rebecca that the IRS approves of it all. So Mark’s going to give us an accountant’s perspective on a bunch of other things and share with us some things that a lot of folks don’t know that they have to do here in 2024. So Mark, without further ado, why don’t you take us right into it if you don’t mind?
Certainly. Thank you, Jeff. So this is a little bit more about me when you’re bored and you need a reason to go to sleep. So next slide please. [01:06:30] So we’ll talk about the FinCEN in a second, which is a big, big thing. But I’m actually going to go off script based on a bill that has made its way through the House Ways and Means committee. And it appears that the Senate is going to take it up and it also appears the tea leaves are sharing that there’s a reasonable likelihood that President Biden will enact this bill [01:07:00] into law. So this bill has many, many… It’s called the Tax Relief for American Families and Workers Act of 2024. If anyone wants a job to come up with better titles, I’m sure there’s plenty of room for quality applicants. But this bill among other things, does deal with several challenges and problems and it does certainly lend itself to fold into other areas of my presentation as well as other topics that have already been discussed.
[01:07:30] Specifically, this of course is going to be a retroactive adjustment for certain things. So there are additional enhancements of the child tax credit on a go forward basis. I’ll skip that. A big one that many employers, many closely held businesses ended up getting ensnared by over this past year, were changes to the R and D credit, or more formally known as the credit for increased research and development expenses. There [01:08:00] are two hour long courses on the RR and D credit and how important it is and how beneficial it is for enterprises that are either doing and creating intellectual property, doing research activities, especially in the Commonwealth of Massachusetts given our innovation economy. The changes that were enacted as part of the Trump tax law to the R and D credit, everyone thought that they were going to be pushed down, pushed down, pushed down, pushed down. Well, [01:08:30] what was in the law actually did indeed come into effect for tax year 2022. If this bill passes, which it appears that it will, the enactment of the changes to the R and D credit will be once again pushed back.
So that gives an opportunity for many taxpayers to speak with their accountant to determine whether or not they amend their returns for 2022 to take advantage of the old rules as they were, which were more [01:09:00] beneficial for most folks. Second piece is bonus depreciation which everyone loves, which is the ability to write off 100% of equipment purchases, certain qualified property, standard ones if you’re familiar with it. Also, as part of the Trump’s tax law that was sun setting away. This year I believe it was 85% you were going to be able to write off in 2023 and 2024, [01:09:30] while that’s back up to 100% retroactively. So again, that’s an opportunity to again look and see if an amendment makes sense or to make some plans going forward. The 179 deduction, which everyone knows that’s increased interest deductibility.
And a big one, again, there’s a bunch of other small nuisance things that are in there, a biggie for everyone since we are all in 1099 season, the 1099 threshold for 100 years has been $600. Well, [01:10:00] I guess inflation’s even having an effect here. The IRS is now realizing that there’s not enough juice for the squeeze, so to speak, to get these for 600. They’re looking to increase the threshold to $1000 on a go forward basis for tax years beginning after 12-31-23. So that would be starting in 2024. The big thing though that we’re going to fold into later into our presentation are some new changes to the Employee Retention [01:10:30] Tax Credit law. And those provisions from COVID relief and how they will certainly impact what many people are thinking about. But before we get there, let’s talk about the beneficial ownership information reporting.
So this was created by another bureaucratic law called the Corporate Transparency Act of 2021. And you can thank both of our illustrious two past presidents, our current president as well as our immediate past president who both [01:11:00] had ownership interests in lots and lots and lots of different LLCs and entities. And everyone, even the federal government was saying, all right, the ownership and the ability to figure out who really owns what and what interests to this and that, was becoming opaque even for them. So as the government tends to do, they said, “All right, let’s create a new regulation.” So FinCEN is under the United States Treasury, they tend to do a lot of the anti-money laundering, foreign asset control activities. And long [01:11:30] story short, what they’ve done is this, if you are an entity that has less than five million dollars in revenue and less than 20 full-time employees and is not subject to an exemption, you will need to do a filing prior to December 31st, 2024 with the US Treasury disclosing who owns your entity and what percentage they own the entity. [01:12:00] It is estimated that 32 million entities…
It is estimated that 32 million entities will have to file prior to 12/21/23 and about 5 million entities a year. So again, the big thing is if you’re an LLC, if you’re a corporation, if you’re a professional limited liability company, a limited partnership, you are more likely than not, you’re subject to at least considering whether you are in a position where you need to do the BOI reporting.
[01:12:30] If you are a sole proprietor, if you are a general partnership, you don’t need to worry about anything. Control persons also need to be reported. So if you’re a control person, a CEO, a CFO for a closely held business, but you don’t have an equity stake, there are aspects of your interest in the entity that needs to be disclosed as well.
Anytime on a go-forward basis, this is not an annual filing, this is a one-time filing, but anytime an entity has an update to [01:13:00] their ownership structure on a Go-forward basis will have 90 days to file an update in the ownership form with the treasury. Okay, so what if I blow it off? Well, the government’s going to want $500 per day up to $10,000 and best thing is up to two years in prison. Whether they rarely do that, who knows, but there’s lots of entities, lots of corporations, lots of wealthy families that each have oodles and oodles of LLCs for different private purposes. Something to be thinking about.
Many accountants [01:13:30] are doing this work. Many accountants are still kind of waiting and seeing because there is a question as to whether it’s the unauthorized practice of law since it is not a tax regulation, the jury is out. I believe my partners and I have decided that we’re going to do it by utilizing a tool through one of our software providers, but definitely something on something that needs to be considered, fortunately not prior to tax time, but needs to be considered nonetheless. Next slide please.
[01:14:00] Next is this. This is a wonderful provision. I’ll go very quickly. I know there are many closely held employers that own their own businesses and often own their own buildings. One of the big benefits of the alleged Inflation Reduction Act of 2022 was it codified on a permanent basis energy efficient investments. Specifically, I’m speaking to solar panels.
We see many, many, many clients of ours taking the advantage of this to both reduce their [01:14:30] ever inflating electric bill while being able to also significantly reduce or enjoy a significant tax subsidy from the federal and state governments to make these changes. So, upon signing the agreement to put a solar array or a solar installation on your building for business purposes, upon signing the agreement and putting at least 10% down, you are able to enjoy the full 30% tax credit.
So a tax credit is a dollar for dollar reduction [01:15:00] of tax. So as an example, if it’s a hundred thousand dollars system, you put down 10 grand, you get a $30,000 tax credit on your tax return. Okay? Once the system gets turned on, you are then able to write off a hundred percent of 85% of the cost because they’re not going to give you a hundred percent since you have the credit.
So it would be an $85,000 write-off for federal purposes, and Massachusetts will let you depreciate it over five years. Additionally, Massachusetts has the SRUK [01:15:30] incentives, Solar Renewable Energy Credits. Other states have other things that will further incentivize it. But the big thing is if you’re looking at the ROI, which most business owners are for most, it’s under three and a half years. Once you’ve take into account the tax incentives and the utility savings on a go-forward basis.
Next slide please and pardon my fast speech, but I figured the update up front on the latest and greatest would be very important.
So we are now to ERTC, Employee Retention [01:16:00] Tax Credit. So like so many aspects of COVID relief, this evolved and continues to evolve over and over again. So the latest is this. There’s an old saying, and I’m going to coin it incorrectly, that every good idea eventually devolves into a racket. I think everyone can remember in the not so distant past how PPP became a racket. ERTCs become a racket, hence why the IRS has suspended processing new claims. They have not canceled and [01:16:30] said they’re not going to process the claims that are in queue, but the IRS needed to catch up with their enforcement activities given the size of checks that are going out.
This program has been more of a giveaway than PPP was or anything else. Thus far, last data I was able to see, which was several months ago, I think it was like August, September, over 230 billion with a B has gone out in ERTC claims that’s been paid. Or sorry, 8 billion, [01:17:00] the IRS has paid, sorry, 230’s gone out and as of September the IRS has paid out in excess, they estimate of over $8 billion in fraudulent claims.
Windfall for likely half of the recipients. Now, what that means is more than half of the people that received the ERTC money, even though they were entitled to it, didn’t need the money, which is kind of interesting. So what the IRS has done given this rampant fraud in their inability to sufficiently police and recover [01:17:30] all this money is they’ve issued, and they didn’t do this in the pending bill, but it’s already been out there, an amnesty program where they’re saying, “All right, if you’ve got a hundred grand and you called the phone number you saw on late night television to get your ERTC done with substantiation, no basis in the law, and you just said, “Hey, I’m going to throw it against the wall, and if it comes, great.”
Well, if you are one of those people and you’re like, “Whoa, I don’t really want to deal with this because the IRS [01:18:00] is going to come knocking,” so if you’ve got a hundred grand, the IRS is going to say, “Hey, go on this website.” There are steps to withdraw your claim, pay back 80 grand. You can keep 20 grand free of troubles, and that’s the end of that.
There is no data out yet on how many individuals, how many businesses have taken advantage of the amnesty program. But if I were to read the tea leaves, the IRS is going to extend the statute of limitations on the filing of these returns [01:18:30] as many times as they need to until they feel that they have gotten as much fraud out of it as is practical.
There is also with ERTC, if you received ERTC as a business owner and you did not amend and you have a S corporation or an entity that files a partnership tax return 1065, so that’s most of your LLCs, if you did not amend your tax return to declare the additional income you will need to. ERTC [01:19:00] is taxable income. It is not like PPP forgiveness that is not taxable and you have to pay interest. So that hasn’t happened., It’s certainly something you want to do because the IRS is going to come and crack down on that one for sure as well.
The other big ERTC news is that this is the runaway train, the runaway giveaway that no one can quantify when this damn thing’s going to end. So in this bill that I was referencing earlier, that right now is with the Senate, [01:19:30] they are proposing a final date for mailing of all ERTC claims to be not too distant in the future, January 31st, 2024. So as we understand it, if your claim for ERTC is not postmarked by January 31st, 2024, speak now or forever hold your peace. This is very consequential.
So our firm has done a lot of ERTC work for our clients and we’ve done it properly and thoroughly [01:20:00] with beautiful audit files. So when the IRS comes knocking and it’s inevitable given the amount that we’ve done, we will have a nice audit file to substantiate the positions that we’ve taken with our clients. There’s a backlog, so we’re working hard to make sure we get everything out and we will, but just if you have not considered it, definitely something to look into if the facts and circumstances hold out to be accurate.
Next slide please. [01:20:30] Now this is about payroll and HR, so we’ll have some payroll and HR things. So we’ve talked a lot about flexible work and remote workers and all these other things. Well, what I find, and I’m beyond my 15 minutes, so please indulge me a couple minutes since I had some extra info, Mr. Jeff. So there’s a lot of implications of remote workers beyond just making sure they have a current laptop and you know what they’re doing.
So Nexus, [01:21:00] many people have heard is your business presence in the state. So if you have remote workers throughout the country. As a business owner, you want to make sure that you are protected, your company’s protected, your employees protected. So I’m not an attorney, but my understanding is that in every state that you have an employee whose permanent place of work is that state, your business needs to be registered to do business in that state. Your business needs to be [01:21:30] paying into the unemployment system for that state. It needs to have employee benefits that comply with the laws of that particular state needs to also comply with whatever state specific Department of Labor regulations exist.
So it’s not just, “Oh, you work for Massachusetts employer and you happen to be in Kansas.” Well, you also need to be a Kansas employer at that point. This also has [01:22:00] for many businesses, non-employment related implications. Specifically, it may create Nexus from a sales tax perspective if you are selling product, and it most certainly creates Nexus from an income tax perspective depending upon whether the state your remote employee is working in uses employment or employees and number of employees in the state as an apportionment factor, which are the ways that we determine how much goes in what state. So definitely, [01:22:30] you want to look at this, make sure you dot your I’s, cross your T’s because it’s another one of those things we find many employers are not necessarily paying attention to because they’re just focused on obviously getting people up and running.
Next slide please. My final comment, and this kind of dovetails into what Rebecca is speaking about, is we’re seeing now that as we live in a huge world of scarcity after the diaspora of employees following COVID, that [01:23:00] more and more employers are trying to attract and retain, focus on retain their top talent. So we’re not just playing a game of one-upmanship over and over and over again to get folks to the compensation level that the market’s going to bear as a maximum. So what we’re seeing come about again is more and more employers looking into using non-qualified plans.
So plans that you can discriminate, plans [01:23:30] that you can do on a one-off basis to retain key staff members. It’s not just for the public company executives with billions of dollars. You can do it for several people that are just folks making a couple hundred, maybe even a hundred. It’s all sorts of plans beyond the scope of this call. But if you have a couple of employees that you’re like, “Hey, I really wish there was something I could do that would kind of function as golden handcuffs,” there are many tools that are not that expensive [01:24:00] that can help you do that and hopefully cause that key or at least give you as an employer a little bit more runway with that key employee before they decide to hop or consider hopping to what they think are greener pastures. So next slide please. And I believe that’s it. So thank you again for indulging me for going over for a few minutes and I’ll pass it back to Jeff.
Well Mark, thank you very much. You remind me of the guy [01:24:30] on the NFL network doing the red zone all day long, every game, every score, everything. This is the most valuable 90 minutes we’d like to provide you of the year, hopefully, for all of you that are listening. So thank you Mark. Everybody else can come back on. Now we’re going to hit our questions quick. I’m going to round it out at about 3:30.
So thanks everybody for participating and [01:25:00] all of your information has been very, very valuable. I do want to say one thing, and that is, even though there are attorneys on the call, even though there’s a very qualified HR, very qualified payroll and certainly CPA on the call, keep in mind that this is all for informational purposes. This is not to be construed as the practice of law. This is to give you guys information.
If you have [01:25:30] specific questions that want to go deeper, we certainly welcome you to get in touch with any of our panel today. Or if you already have employment attorneys, CPAs, etc, at least ask them and get into more detail because they’re going to know more information about your specific situation than we will. So having said that, let’s hop right into some of the questions. I’m going to start with Rebecca. I promised you some good ones. First question was, do the 401k [01:26:00] discussions with Secure 2.0 such as the student loan repayment etc, apply for everybody that has a 403B plan?
Generally yes. So if you have a 403B, you can piggyback off of the Secure 2.0 [01:26:30] provisions, whether or not they are mandatory, actually, the ones that I said for 2024 so are not mandatory, they are voluntary. So a provider of a 403B plan would be permitted to do the student loan repayments if they so elect, they would be permitted to do a [01:27:00] non-highly compensated employee fund. And in terms of increasing any minimum distribution age, that’s a voluntary amendment as well.
So there was a question specific it said, so this was just confirmations though some of the components of Secure 2.0 are optional are not required?
[01:27:30] I’m sorry, you froze for a minute.
There’s a question whether some are optional and some are mandatory?
That is correct.
Some are optional. Some are mandatory. The ones that I just referenced for 2024 are optional.
Okay, awesome. Excellent. Okay. And then related on the nonprofit question, does the Corporate Transparency Act impact nonprofits, Mark, or is that [01:28:00] one of the exemptions?
They are exempt.
Okay. All right, excellent. Back to Rebecca, if an employer has a POP plan in place, are they required to do non-discrimination testing and who’s responsible? The TPAs or the employer? Hang on a second. Or the employer.
So the employer is going to ultimately be responsible. If it’s only a POP plan and they [01:28:30] can demonstrate that there’s a safe harbor and if they can demonstrate that the ratio of the non-highly’s to highly’s is above a certain percentage, then you automatically satisfy all of the non-discrimination tests.
Okay, excellent. All right, this one was to Al on the overtime [01:29:00] provision change. The very first thing you led off with, when is it going to change to 1059, that salary floor? And actually now that I’m mentioning it, can you sort of explain real quick because the exempt non-exempt components of that.
I believe it’s expected to kick in the fall, so there’s still a little bit of time, so there’s still a little bit of time [01:29:30] when that’s going to kick in. So we have time to prepare. Exempt versus non-exempt, in what respect? So what do you want me to say about the exempt versus non-exempt?
Specifically, this is going to impact the definition of exempt and non-exempt, will it not?
Yes, it will. Particularly with the increases being for professionals, administrative individuals [01:30:00] or whatever. So right now I think the number is if a professional or executive is under 684 a week, they’re not exempt, so they would be able to get overtime. So that number is going to increase from the 684 to whatever it was, 1,059 I believe. So that is going to increase or change the requirement of when somebody can be considered exempt.
[01:30:30] All right, excellent. Thank you. Okay.
One of the last ones for Rebecca, I thought employees can still be excluded if they have specific job titles that are excluded from the plan. I presume this means Secure 2.0, as long as the excluded class or job title is not a disguised age or service requirement.
Yeah. So I think that question is going to the long- [01:31:00] term part-time employees where if they are working above 500 hours for a period of three years currently, two years in the future, that is correct. That is a way to exclude certain employees, but you categorically cannot say part-time employees. You could alternatively say all employees of the warehouse distribution site located in Framingham [01:31:30] Massachusetts, for example. But the concern there is that you still have to pass your non-discrimination testing. So yes, you are able to exclude but so long as you pass your non-discrimination testing.
Okay, excellent. All right, awesome. All right, last question and I’m going to give it to Michelle but anybody can answer it if they know. Michelle, you mentioned the state exploring [01:32:00] the four-day workweek. Now, you had on your slide the four-day workweek with ten-hour days, but is that what the state’s exploring or are they exploring something different for eight-hour days? I’m not sure, I’ve heard it both ways.
I’m going to kick that one to Al if he happens to know the answer.
Nope, I mean, I think it’s still under discussion. It’s in the works, a thought of [01:32:30] what they may want to do. So it doesn’t surprise me that some people may have heard eight-hour days. Some people may have heard ten-hour days. I think it’s a wait and see that if it happens, what the number will be.
Okay, excellent. All right, well that exhausts our questions. So once again, I want to give a big shout-out to all of our participants in our panel. Thank you Al. Thank you Rebecca, Michelle and Mark. Again, we will be sending out a recording [01:33:00] of this session and also we will be sending out the deck. If you have additional questions or you want to go deeper, we will provide you with contact information for all of our panelists if you want to know more and get to know them or ask them some questions and certainly that’ll happen in the next hour or a couple hours we’ll call it. But you should have it very soon. Again, thanks for bearing with us for 90 minutes. Hopefully you got a lot out of it. Again, I’m Jeff Plakins, we’re Commonwealth Payroll and HR [01:33:30] and we appreciate you in trying to be the employest. Thanks everybody.