In this issue:

• What to Do in the Event of an Active Shooter
• Are Gift Cards Considered Taxable Income?
• Department of Labor Overtime Rule Delay
• What DC Employers Need to Know in 2016
• Did You Know?

Are Gift Cards Considered Taxable Income?

Giving gift cards is an easy way to show appreciation to employees, which likely improves morale, but gift cards can become an administrative burden and anger employees with a tax surprise. Most gift cards incur some kind of taxes, so your company should consider gifts that avoid taxation. However, there are non-taxable alternatives to convey your gratitude.

Internal Revenue Code Section 102 covers the general rule that excludes property acquired “by gift, bequest, devise, or inheritance” from gross income. However, Section (c)(1) of this law provides that employee gifts (including prizes and awards) – specifically “any amount transferred by or for an employer to, or for the benefit of, an employee” – may not be excluded from gross income.

So the general rule is that employee gifts and prizes are counted as income. However, as with most laws, there are exceptions.

“De minimis” fringe benefits are excluded from income. De minimis benefits are those that are “so small as to make accounting for [them] unreasonable or impractical.” For example, “occasional tickets for entertainment events; [certain] holiday gifts; flowers, fruit, books, etc., provided under special circumstances, etc.”

The IRS has ruled that items with a value exceeding $100 cannot be considered de minimis. Additionally, cash and cash equivalent gifts/prizes (such as gift certificates) cannot be considered de minimis or excluded from income because there is no difficulty in accounting for such prizes.

In other words, any gift card that serves as a cash equivalent – such as a $25 Amazon gift card or a Visa cash card – would always be taxable regardless of the amount because there is no difficulty in accounting for the monetary value of the gift.

However a gift with a less obvious cash value – such as a holiday turkey or tickets to an event – would not be taxable as long as the value does not exceed $100.

For additional information, the IRS provides a very detailed and helpful guide to understanding fringe benefits.

If you have any questions or concerns about how employee gifts may affect your company specifically, please contact Michael Lanham, PHR, HR Manager by phone (443-321-7726) or by email (mlanham@hri-online.com).

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Department of Labor Overtime Rule Delay

At the American Bar Association’s Labor and Employment Law Conference earlier this month, the Solicitor of Labor, M. Patricia Smith, announced that the finalized changes to the FLSA’s overtime eligibility rules likely won’t be issued until late 2016.

In 2004 – the last time the Fair Labor Standards Act (FLSA) overtime rules were overhauled – the DOL provided 120 days for employers to review the new regulations and to make the necessary changes in their organizations. In 2016, the DOL might find itself with a much shorter window, perhaps only 30 or 60 days, between when it publishes the final rule and when the rule has to go into effect.

In the event that employers do have as little as 30 days to implement the final rule, they may prepare to reclassify workers by getting ready now for different possible scenarios under the final rule; do their best to reclassify after the final rule; or wait until after the presidential election in hopes that the rule might be revoked.

Another possibility employers should prepare for is a phased-in effective date. Phased-in effective dates have been used with minimum wage laws in some cities this year and could be used for the raised salary threshold to make the process more manageable.

HRi is closely monitoring developments and implementation timeline of the new Department of Labor Overtime Rule on behalf of our clients.

Should you have any questions or concerns about how this new federal regulation may affect your organization, please contact Michael Lanham, PHR, HR Manager by phone (443-321-7726) or by email (mlanham@hri-online.com).

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What DC Employers Need to Know in 2016

DC Health Link

As of January 1, 2016 all DC Employers MUST offer benefits through the DC Health Link. The DC Health Link offers quality, affordable medical, dental, and/or vision insurance to individuals and families as well as small businesses. Businesses with 1-50 employees are eligible and can enroll anytime.

This applies to DC Employers who are not renewing their health benefits with their current insurance carrier in 2015. If you are a DC Employer and are renewing your health benefit plans in 2015 with your current carrier, you are not required to enroll through the DC Health Link for the 2016 enrollment period.

For example, Company A currently offers health benefits through Insurance Carrier A. Should Company A renew their plan with Insurance Carrier A in 2015, they will not need to enroll through the DC Health Link. However, should Company A decide to change insurance carriers from Insurance Carrier A to Insurance Carrier B for 2016, they are required to enroll through the DC Health Link.

When renewing health benefit plans for the 2017 enrollment period, all DC Employers must offer benefits through the DC Health Link – regardless of whether they are renewing with their current insurance carrier or not.

HRi understands this regulation can be complicated. We are here to help you navigate the complexities of the DC Health Link and to help your employees make the best selection for themselves and their families. Please contact Chris Rutzebeck, Benefits Manager, by phone (443-321-7738) or by email (chris@hri-online.com) if you have any questions or concerns about how this may affect your organization.

DC’s Commuter Benefits Ordinance

By January 1, 2016, DC employers with more than 20 employees will be required to provide one of three commuter benefit options.

1. Employee-Paid Pre-Tax Benefit

Commuter benefits in the form of employee-paid pre-tax deductions are federally approved employer-provided incentives for employees to reduce their monthly commuting expenses for transit, vanpool and parking.

Employees have an option to set aside $130/month in pre-tax funds through their paycheck each month for their transit or vanpool expenses or $250/month for parking expenses. By doing so, taxable income is reduced, which translates to a travel savings of up to 40 percent. As a result, business payroll taxes decrease, so you may see up to 9 percent savings for each employee participating in the benefit.

2. Employer-Paid Direct Benefits

Commuter benefits in the form of an employer-paid subsidy are federally approved employer provided incentives for employees to reduce their monthly commuting expenses for transit, vanpool, biking and parking.

Through this option, you can subsidize employee transit, vanpool, and bike commuting costs. As with the employee-paid benefit, you do not pay payroll taxes and employees do not pay federal or payroll taxes on the benefit amount. IRS code states employers are able to directly offer employees up to $130/month for transit or vanpool; or $20 for bicycling benefits.

3. Employer-Provided Transportation Service

Employer-provided transportation service can include vanpools from outside of DC limits or shuttles from Metro stations, Park-and-Rides, major hubs or anywhere else employees are commuting.

For more information, please visit the District Department of Transportation. Please contact Michael Lanham, HR Manager, by phone (443-321-7726) or by email (mlanham@hri-online.com) if you have any questions or concerns about how this may affect your organization.