June 2013 Newsletter

In this issue:

June is National Safety Month
Small Businesses Are Reaching Out to PEOs for Compliance with the Patient Protection and Affordable Care Act
Employee Mis-Classification: 1099 v. W-2
Benefits of Match Thresholds

June is National Safety Month

National Safety Month – sponsored by the National Safety Council – is an annual observance to educate and influence behaviors around leading causes of preventable injuries and deaths. Successful organizations engage everyone in safety and create a culture where people feel responsible for not only their personal safety but for that of their co-workers, families, and friends. While leadership from the top is important, creating a culture where there is an ownership of safety by all, makes everyone in the organization a safety leader.

PEOs can assist in keeping your workforce safe and protected through an established Worker’s Compensation program and developing effective policies and procedures. There are a number of statistics from the NCCI 2013 State of the Line Report highlighting the effectiveness of PEOs in the Worker’s Comp arena:

PEOs have the same or better loss ratios across the board.
Development of claims for PEOs was half!
PEOs have twice better compliance on issues such as audit.
PEOs do not underreport claims. In fact, we report more than other industries overall, thus giving a better understanding to frequency issues.
Less than 1% of PEO clients “get lost in the system.”

For more information, visit the National Safety Council website.

Small Businesses Are Reaching Out to PEOs for Compliance with the Patient Protection and Affordable Care Act
With insurance premiums on the rise and healthcare reform deadlines on the horizon, many small companies are looking for strength in numbers. Some are joining PEOs so they can provide a strong health plan to their employees, and outsource the complex administrative tasks associated with them. Since the final rules and regulations have not yet been released, there are a lot of unknowns for small business owners. Employers are turning to PEOs as the subject matter expert and to help them remain in compliance with the new law.

The PEO business model is a co-employment relationship between the employer and the PEO, which allows the PEO the ability to consolidate risk and combine small group employers together to make them a large employer for the purposes of underwriting. This strategy will help a small employer maintain lower premium rates and give it more financial flexibility in exchange for “sharing” the risk of employment and all of the responsibilities that come with that role. This solution might be the right fit for employers in a preferred risk industry or with a healthy workforce.

For more information, please contact Jena Judd, HR Business Partner.

Employee Mis-Classification: 1099 v. W-2

According to the IRS, an employee is anyone who performs services for an employer if the employer can control what will be done and how it will be done. Independent contractors are defined so if the payer or employer has the right to control or direct only the result of the work done, and not the means and methods of accomplishing the result. Establishing that someone is truly an independent contractor isn’t easy.

The IRS has recently issued an 11-factor determination test. The 11 factors are organized into three categories: 1) behavioral control, 2) financial control and, 3) the relationship of the parties. In order to decide whether your worker is an independent contractor or W-2 employee, consider the following:

1) Under behavioral control, examine:

instructions that you give the worker
training that you give the worker

2) Under financial control, examine:

the extent to which the worker has unreimbursed business expenses
the extent of the worker’s investment
the extent to which the worker makes services available to the relevant market
how the worker is paid
the extent to which the worker can realize a profit or loss

3) Examine the relationship between the parties:

are there written contracts describing the relationship the parties intended to create
does the company provide the worker with employee benefits (insurance, 401(k) plan, vacation or sick pay)
permanency of the relationship
extent to which services performed by the worker are a key aspect of the company’s regular business

Unless an employer is confident it can satisfy all the above factors, it should assume that it’s workforce are employees and not independent contractors.

For more information, please contact Jena Judd, HR Business Partner.

Benefits of Match Thresholds

In a 401(k) plan, the “threshold” is the limit at which participant contributions are matched by the employer. It has been shown that a higher match rate (for example, an employer match of 80% rather than 50% of an employee’s contribution up to 6% of salary) has only a small effect on savings plan contributions. In contrast, raising the match threshold (for instance, matching 50% of an employee’s contribution up to 10% of salary, rather than 6%) has a substantial impact. This is because most people view the threshold as a natural reference point when deciding how much to save. The threshold may also be perceived as advice from the plan sponsor on how much to save.

It is important to educate employees on the savings plan’s design so they are able to take advantage of the full amount of an employer’s match money on contributions. For example, an employee can contribute too little, not taking full advantage of the match. On the other hand, an employee can contribute too much to the plan and reach the annual federal limit on contributions before the last pay period of the year – also missing out on employer match contributions.

For more information, contact Alison Lalla, Pension Administrator.

Did You Know?

Tricia Stock, our Chief Financial Officer and Julie Kramer, our Risk Manager, attended NAPEO’s 2013 Legal & Legislative Conference in May.

Here are some highlights they shared with us:

Recent NLRB issues, including unconstitutional appointments to the Board and rulings being stricken down by the courts will have far reaching implications.
I-9 fines issued by the US Citizenship and Immigration Services have jumped from $0 five years ago to $13M in 2012.
Mis-classification of W-2 employees and independent contractors is a focus of the Department of Labor this year. The DOL has increased their budget to find and prosecute violating employers.