Department of Family and Medical Leave – Update

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The Department of Revenue recently released important information on how to report PFML Wages for the 4th Quarter 2019 Paid Family and Medical Leave Return. The Department of Family and Medical Leave is providing this update for all employers participating in the Commonwealth’s PFML program to ensure an accurate filing of withholdings by the quarterly deadline of January 31, 2020.

PLEASE BE AWARE THAT THIS REPORTING REQUIREMENT DOES NOT APPLY TO EMPLOYERS THAT HAVE RECEIVED AN EXEMPTION FROM BOTH THE FAMILY AND MEDICAL LEAVE PROGRAMS OR ARE CONSIDERED EXCLUDED EMPLOYMENT PER SECTION 6 OF THE UNEMPLOYMENT STATUTE.

IF YOU HAVE ONLY RECEIVED AN EXEMPTION FOR ONE LEAVE PLAN, YOU MUST SUBMIT FOR THE NON-EXEMPTED PLAN, ACCORDING TO THE INFORMATION PROVIDED BELOW.

When reporting 2019 PFML contributions, please report fourth quarter wages only in both the PFM Eligible YTD Wages and Wages This Quarter boxes on the MassTaxConnect return. For the calculation to be correct, do not report actual 2019 year-to-date wages in the PFM Eligible YTD Wages box.

The reason for reporting only fourth quarter earnings in the PFM Eligible YTD Wages box is that contributions were not withheld for the first three quarters of 2019, so the Social Security annual wage cap should only be applied against fourth quarter wages.

This will only be necessary for this first PFML reporting as contributions were not withheld on all 2019 wages.  When submitting future returns, you will report the actual YTD wages in the appropriate box.


IF YOU HAVE BOTH W-2 EMPLOYEES AND INDEPENDENT CONTRACTORS, BUT YOU OUTSOURCE ONLY W-2 PAYROLL SERVICES TO A THIRD PARTY
Important information about the timing of reporting

If your company outsources only W-2 payroll services to a third party, and handles reporting for your independent contractors (whose payments are reported on 1099-MISC) internally, there are some rules to follow when filing returns. It’s very important that the reporting be done in a specific sequence for it to be processed correctly.

First, the payroll service, filing on behalf of your salaried employees (W-2s), must file before you file on behalf of your “covered contract workers” (1099-MISCs covered under the PFML Statute). Next, when you file on behalf of your covered contract workers, you must identify your filing as an amendment to the return already filed by your payroll service (see screenshot below). Please follow this sequence to be certain the information is properly recorded.

 

MORE INFORMATION

The Department of Family and Medical Leave oversees the Commonwealth’s Paid Family and Medical Leave program. Check out their website for a fact sheet, guides and information for both employers and workers.

You will find more information on exemption requests, registration, contributions, and payments for the Paid Family and Medical Leave program from the Department of Revenue.

While You Are Away, Cybercriminals Will Prey

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Travel seems to be on everyone’s calendar this winter. If that’s the case for you, safety and security are likely uppermost on your minds today. So great is the concern that 72% of U.S. travelers said they would pay more for their vacation if they could ensure greater security, according to a recent survey by Travelzoo. What travelers may not realize is that cybercrime is now as much a threat, if not more, than conventional dangers.

Whatever your travel plans, you should be aware of the following safety and security issues:

A Safe-Travel Cyber Checklist

Don’t discuss travel plans on social media.  Social media is great for keeping family and friends informed about your travels, but sharing can backfire if cybercriminals find out when you are away and burgle your home. Do not post travel dates or itineraries, and warn your children not to share their own or your travel plans — and never to reveal when no one is home.

Be wary of public Wi-Fi. You should always use secure connections when going online in public places. If you have to use an unsecured connection, never check bank balances, login to credit card or other accounts, or share important personal information. This information can easily be stolen over an unsecure network. Also, turn off Bluetooth and other connectivity features when in a public area, as these features can be just as vulnerable as Wi-Fi.

Be careful getting cash and making payments. Be cautious of where you make payments or get cash, since these are the key access points for identity theft among cybercriminals. Using ATMs at a bank branch is safer than using standalone ATMs, and using a credit card for merchandise purchases is safer than using a debit card, which provides direct access to a bank account. You should be sure that your liability policy has identity theft coverage.

Turn off home computers. Many people leave their computers on as a matter of habit, but always-on computers are more susceptible to hacking.

Back up all data. Storing all sensitive files in a secure facility on the cloud is recommended, as is backing up data onto a removable storage device that can be kept in a home safe.

Change passwords. If you are taking an iPhone on your trip, we suggest you change your Apple ID password to something long and difficult to hack. Also remove credit card information associated with your Apple account and turn on the lock-screen passcode. That way, if your phone is lost or stolen, little information can be accessed. Also turn on the “Find My Phone” feature, which can help you find a misplaced or stolen device and the information stored on it.

Register for the Smart Traveler program. The State Department’s Smart Traveler Enrollment Program (STEP) at https://step.state.gov/ is a free service that allows citizens traveling abroad to enroll their trip with the nearest U.S. embassy. Enrollment enables embassies to reach travelers in an emergency, as well as help family and friends contact the travelers.

Protect the home while away.  If you will be gone for any period of time you should take the following steps to protect their homes from cybercriminals:

  • Alert the home alarm provider so they will know the house is vacant; ask their alarm company if they offer an encryption tool for their home security system to make it less vulnerable to hackers.
  • Disconnect the garage door opener and lock it manually to protect from criminals who can crack the electronic code.
  • Unplug any devices or appliances connected to the internet.

 

Investing for the Long Haul

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Financial market ups and downs are challenging, to say the least, for many investors. Saving for retirement makes you a long-term investor, but it is important that you shape your investment strategy by revisiting a few fundamental investment concepts every 6 to 18 months, regardless of market conditions.
Revisit Your Risk Tolerance
What level of investment risk is suitable for you? Are you still an aggressive investor, or has your personal situation changed since the last time you evaluated your risk tolerance? Are you still a long-term investor, or are you getting close to retirement and therefore need to be more conservative? If your needs have not changed and you still are investing for the long term, this may not be the time to change your investment mix.
Don’t Chase Returns
How many people do you know that bought into the “hot stock” they read about, without evaluating the risk involved? This is a risky strategy, as such stocks may be overvalued and end up losing money instead of making it.
Diversify
Every asset class (investment category) has its ups and downs. If your portfolio is well diversified, you will be in good position to benefit when an asset class excels—as opposed to chasing returns after the fact. For example, when growth stock funds were excelling, value funds were not; when stock funds declined, bond funds did well. Over the course of time, a well-diversified portfolio can provide increased performance while decreasing risk. In addition, diversification is a disciplined approach to investing, rather than relying on emotions or impulse.
Keep Investing Through Payroll Deduction
When the market is down, you are buying more shares or units for your dollars. Investors should actually feel good about buying in when the market is low; ideally, when you reach retirement, those shares will be worth more.
Invest for the Long Haul
Remember your long-term goals and invest for the long haul, rather than for short-term market swings. Statistics show that staying the course, rather than switching in and out of funds, is typically the wiser choice. Often, investors make the mistake of selling when the market is declining, and buying back when it is going back up. This is the opposite of what they should be doing to maximize returns.
What About Current Events?
The uncertainty surrounding current events poses significant challenges for investors. One thing we do know: the stock market hates uncertainty. Thus, having diversification of investments is key! A mix of investments—cash, bonds, stocks—will help minimize the risk of a large loss.
Though a large event may cause a serious market reaction in the short-term, often the market balances out after the event has passed. The secret to weathering all types of market swings is to resist the temptation to panic or overreact. Stay disciplined, keep a long-term approach and maintain a diversified portfolio balanced appropriately for your particular risk tolerance. These basics of long-term investing can be your blueprint for not just surviving, but succeeding in the market.

Slip and Falls: Where Do You Stand?

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Presented by: Christopher F. Hawthorne, CPCU, CIC

As we settle into winter, it is an appropriate time to revisit the issue of liability from slip and falls (S&F). As mentioned in prior Cleary Quarterly articles, Massachusetts laws have changed, making it easier to establish liability to those involved. As such, we are seeing an increasing number of slip and fall claims filed against our clients. When someone is injured, who is responsible?

 

S&F claims can be quite large and long-lasting claims. When a person is initially injured, the extent of the damage, medical bills, possible lost wages and other pain and suffering are unknown and therefore a personal injury attorney will often wait as long as possible before filing a lawsuit against the potentially responsible parties. However, it is always a good idea to gain knowledge about how to claim for slip and fall even before visiting the attorney!
 

As an example, Mr. Smith is walking into a local restaurant and slips on ice. After Mr. Smith falls and injures himself, he or his attorney may identify several potentially responsible parties. Those responsible might be the restaurant, the property owner or a snow removal contractor if one is used. All three will need to notify their General Liability insurance carrier and potentially, three different carriers will then post a reserve on their insured’s file be it the restaurant, the property owner and the snow removal contractor.

 

All three carriers then will wait to hear from Mr. Smith’s attorney. These losses can sit for several years before the actual suit arrives to allow the loss to grow. Meanwhile all three parties are paying premiums based on the assumption that their insurance is responsible and this can raise the rates for all three.

 

To avoid this scenario, consider the following risk management steps:

  1. Risk Transfer between the property owner and the restaurant via the lease. The lease should spell out who is responsible for snow and ice removal and be clear to what degree. (Parking lots, walkways, steps, roof, etc.)
  2. Risk Transfer between the responsible party above and the snow removal contractor. This agreement should be just as clear in terms of which party will handle the different areas where snow and ice will accumulate.
  3. In each case an attorney should be used to have the responsible party indemnify, hold harmless and defend the other party.
  4. Verification of Insurance and the limits for the ultimate responsible party with particular attention to affirming that there is no exclusion in General Liability policy of the responsible party for the removal of ice and snow.

 

In this example, if the property owner via the lease takes responsibility and also hires the snow removal contractor, then the lease should protect the restaurant and the contract between the snow removal contractor and the property owner should protect the property owner.

 

The end result after a slip and fall is the easy identification of which party will handle the claim and allow the other two parties to protect their loss history and future premiums. This subject deserves close attention by all three parties to make sure they know where they stand after someone falls.

Cadillac Tax and Other Key ACA Taxes Repealed

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On Dec. 20, 2019, President Trump signed into law a spending bill that prevents a government shutdown and repeals the following three taxes and fees under the Affordable Care Act (ACA):

  • The Cadillac tax on high-cost group health coverage, beginning in 2020;
  • The medical devices excise tax, beginning in 2020; and
  • The health insurance providers fee, beginning in 2021.

The law also extends PCORI fees to fiscal years 2020-2029.

ACTION STEPS

Employers should be aware of the evolving applicability of existing ACA taxes and fees so that they know how the ACA affects their bottom lines. Cleary Insurance, Inc. will continue to keep you informed of changes.

Cadillac Tax

The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax.” This provision taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider.

Although originally intended to take effect in 2013, the Cadillac tax was immediately delayed until 2018 following the ACA’s enactment. A federal budget bill enacted for 2016 further delayed implementation of this tax until 2020, and also:

  • Removed a provision prohibiting the Cadillac tax from being deducted as a business expense; and
  • Required a study to be conducted on the age and gender adjustment to the annual limit.

Then, a 2018 continuing spending resolution delayed implementation of the Cadillac tax for an additional two years, until 2022.

There was some indication that these delays would eventually lead to an eventual repeal of the Cadillac tax provision altogether. The Cadillac tax has been a largely unpopular provision since its enactment, and a number of bills have been introduced into Congress to repeal this tax over the past several years.

The 2019 continuing spending resolution fully repeals the Cadillac tax, beginning with the 2020 taxable year.

Health Insurance Providers Fee

Beginning in 2014, the ACA imposed an annual, nondeductible fee on the health insurance sector, allocated across the industry according to market share. This health insurance providers fee, which is treated as an excise tax, is required to be paid by Sept. 30 of each calendar year. The first fees were due Sept. 30, 2014.

The 2016 federal budget suspended collection of the health insurance providers fee for the 2017 calendar year. Thus, health insurance issuers were not required to pay these fees for 2017. However, this moratorium expired at the end of 2017. A 2019 continuing resolution provided an additional one-year moratorium on the health insurance providers fee for the 2019 calendar year, although the fee continued to apply for the 2018 calendar year.

The 2019 continuing spending resolution fully repeals the health insurance providers fee, beginning with the 2021 calendar year. Employers are not directly subject to the health insurance providers fee. However, in many cases, providers of insured plans have been passing the cost of the fee on to the employers sponsoring the coverage. As a result, this repeal may result in significant savings for some employers on their health insurance rates.

Medical Devices Excise Tax

The ACA also imposes a 2.3 percent excise tax on the sales price of certain medical devices, effective beginning in 2013. Generally, the manufacturer or importer of a taxable medical device is responsible for reporting and paying this tax to the IRS. The 2016 federal budget suspended collection of the medical devices tax for two years, in 2016 and 2017. As a result, this tax did not apply to sales made between Jan. 1, 2016, and Dec. 31, 2017. A 2018 continuing resolution extended this moratorium for an additional two years, through the 2019 calendar year. The moratorium is set to expire beginning in 2020.

The 2019 continuing spending resolution fully repeals the medical devices tax, beginning in 2020. Therefore, as a result of both moratoriums and the repeal, the medical devices tax does not apply to any sales made after Jan. 1, 2016.

PCORI Fees The ACA created the Patient-Centered Outcomes Research Institute (PCORI) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. Under the ACA, the PCORI fees were scheduled to apply to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019.

The 2019 continuing spending resolution reinstates PCORI fees for the 2020-2029 fiscal years. As a result, specified health insurance policies and applicable self-insured health plans must continue to pay these fees through 2029.

This ACA Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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