2017 HSA Contribution Limits and Minimum Deductibles

2017-hsaThe IRS has released the 2017 inflation adjusted amounts for health savings accounts (HSAs). To be eligible to make HSA contributions, an individual must be covered under a high deductible health plan (HDHP) and meet certain other eligibility requirements.

High Deductible Health Plan Coverage
An HDHP has a higher annual deductible than typical health plans and a maximum limit on the sum of the annual deductible and other out-of-pocket expenses. For 2017, the minimum annual deductible is $1,300 for self-only coverage or $2,600 for family coverage. Annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) may not exceed $6,550 for self-only coverage or $13,100 for family coverage.

Annual HSA Contribution Limitation
An eligible employee, his or her employer, or both may contribute to the employee’s HSA. For calendar year 2017, the annual limitation on HSA deductions for an individual with self-only HDHP coverage is $3,400. For an individual with family coverage under an HDHP, the annual limitation on HSA deductions is $6,750. The limit is increased by $1,000 for eligible individuals age 55 or older at the end of the tax year.

3 Things for Employers to Know About Vacation Leave

work-life-balanceWith summer just around the corner, now is a great time to review existing vacation leave policies. Here are three things employers need to know about vacation leave:

1. Vacation leave is not required under federal law. While vacation days are a common employer-provided benefit, federal law generally does not require either time off or pay for vacation. 

2. State laws may apply to pay in lieu of earned vacation. In addition to allowing employees annual time off for vacation, employers also commonly provide pay in lieu of vacation time that employees have earned. A number of states require employers to pay employees for unused accrued vacation upon termination. A number of states require employers to pay employees for unused accrued vacation upon termination, while many states, including Virginia, do not. Contact your state labor department for guidance on your state’s laws regarding vacation pay.

3. Vacation policies should be in writing and communicated to employees. It is very important for employers to develop a clear, written policy regarding paid vacation leave and follow it exactly. Non-written leave policies can lead to inconsistency and complaints from confused employees, as well as claims of discrimination. At a minimum, the policy should include:

  • The categories of employees who are eligible to accrue and use paid vacation leave;
  • The amount of paid vacation leave provided each year and how leave is earned;
  • Whether paid vacation leave can be carried over from year to year; and
  • Whether employees will be paid for unused vacation leave upon termination of employment (in compliance with any state law requirements).

BREAKING NEWS: DOL Enacts Sweeping Changes to Overtime Rules

Department of Labor Enacts Sweeping Changes to Overtime Rules for Salaried Employees: Salaried Workers must earn at least $47,476 or be paid OT Wages for every hour over 40 hours worked per week.

Wednesday, May 18, 2016: This update to the Fair Labor Standards Act has been in the works for almost a year, and the change will go into effect December 1st, 2016. The Department of Labor estimates two thirds of all businesses will have affected workers and somewhere between four and five million Americans will gain higher wages. Restaurant and retail managers, office administrators, and entry to mid-level white collar professional workers are among the most affected.

Checkright’s 6 Step Guide will help you navigate these new rules.

1. Understand the new rules: employees need to receive $47,476 or more in annual salary or they must be paid OT for every hour in any week they work over 40 hours. Other regular, taxable pay like taxable stipends or allowances can count to the $47,476, but irregular, discretionary pay types like bonuses and commissions count only 10% toward the total.

• Example: Sally makes $40,000 per year as an office manager and works 40 hours most weeks. The last week of each month, the office has lots of closings and she works 45 hours one week per month. In that week, she is eligible now for overtime pay. Her annual salary is divided by 2080 to determine her hourly equivalent, $19.23. For the 5 hours over 40 in the last week of the month, she must now receive time and a half or ($19.23 x 1.5) = $28.85 times the 5 OT hours, or $144.25 extra that week. Over 12 months, Sally will make an extra $1731 under the new rules.

2. Identify salaried employees making less than $47,476. Checkright’s payroll specialists will be providing a report to each of our clients listing which employees make under the threshold and what the employee’s annualized salary is currently.

3. Estimate how many hours over 40 per week these employees work in a year. Are there current records tracking the weekly hours? If not, ask each employee directly how many hours of overtime that employee works each year. Remember to take into account all the busy periods and seasonality of the business. Remember that even if a salaried employee works 44 hours one week and 36 hours the next, that employee will earn a full salary on the light week and Overtime pay on 4 hours the heavy week. Use the example above to determine what the annual cost of the salaried overtime would be for each employee.

4. Make choices on a per employee basis about what action to take. If one employee makes $47,176, simply give them a $300 raise and the issue is resolved. Perhaps another employee or two never work over 40 hours per week so there is no issue with them either. For the remainder of the affected employees, make one of the following choices:OT Rule Change

• Raise the employee’s salary to at least $47,476.

• Change the employee from a salaried to an hourly employee. Track the employee’s hours and pay them as you would any other hourly employee.

• Leave the salary as it is and pay Overtime as needed. Calculate the employee’s overtime pay rate according to the example above. Communicate to your payroll specialist at Checkright that you will now be paying Salary OT pay. Track the employee’s hours and report them with each payroll.

• Leave the salary as it is and prohibit the employee from working overtime. Track the employee’s hours worked. Monitor those hours as the end of the week nears and make sure to send the employee home if he is approaching Overtime. Remember, if the employee works Overtime, even if the employer has prohibited it, Overtime must still be paid.

 5. Communicate these changes with your employees. Many employees could view a change from a salaried to an hourly worker as a demotion. Make sure to revisit your policies surrounding time off and benefits as many companies have different policies for salaried and hourly employees that would doubly affect someone being reclassified. Employees who have to clock in and out for the first time may view that as a negative, especially when told to clock out for lunch and breaks. Employees just below the threshold may be happy to receive a raise, but be sure to consider the effects on other employees making just above the threshold. Do you have to also offer those employees raises to keep the office hierarchy intact? Each business owner or HR team should have a plan in place both for what changes will be made, but also for communicating these changes to the team of employees.

6. Focus on compliance by tracking the hours worked. The Department of Labor is going to follow these changes with employer audits where each company will have to produce hours worked records for its employees making less than $47,476. In the case of disputes, it is the company word against the employee’s unless there is time tracking. Notice in Step 4 above, 3 of the 4 compliance choices involve tracking time. Checkright has timekeeping solutions that are integrated right into the systems we already provide for your business. We have white collar timekeeping solutions where the employee can clock in and out on their own smartphone app on the same site we provide to check their paystubs. Checkright’s solutions are as affordable as $1.50 per affected employee per month for a time and attendance system. Let us know if you would like more information about our timekeeping products, but whether you use one of ours or not, make sure to document time worked moving forward.


Chart Illustrating Current and Revised Salary after Rule Changes

Name Current Salary Hours Worked New Annual Pay
Frank $30,000 48 hours/week $38,991.68
Kevin $40,000 50 hours/week $55,000.40
Lillie $45,000 44 hours/week $51,740.00
Kirk $35,000 60 hours/week $61,266.40




Our firm provides the information in this newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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2016 Limits Released for 401k, Simple IRA, Social Security Threshold, HSA, and FSA

MoneySocial Security
The maximum amount of earnings subject to Social Security taxes will remain at $118,500.

Health Savings Account
The HSA contribution single limit will remain at $3,350 and the family limit will increase to $6,750. The catch up limit for individuals over age 55 will remain at $1,000. Note: To be eligible to have contributions made to an HSA, an individual must be covered under a high deductible health plan and meet certain other eligibility requirements.

High Deductible Health Plan
For calendar year 2016, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.

Flexible Savings Account
The 2016 annual limit on employee contributions to employer-sponsored FSAs will remain at $2,550.

The 401k contribution limits will not change in 2016.  The maximum you can contribute to a 401k will remain at $18,000. The catch-up contribution limit for people age 50 or older will remain at $6,000.

Simple IRA
The Simple IRA contribution limit will remain at $12,500.  That catch-up contribution limit for individuals ages 50 and older will rise remain at $3,000.

2016 Holiday Closings

Calendar_0Federal Reserve Bank and office closings for 2016 are listed below. Remember, if the Federal Reserve Bank is closed, we must process direct deposit one day early. Your payroll processor will contact you directly, if your processing schedule is affected.



Federal Reserve

 Friday, January 1   New Year’s Day



 Monday, January 1  Martin Luther King Day



 Monday, February 1  President’s Day



 Monday, May 30   Memorial Day



 Friday, July 1  Checkright Employee Retreat



 Monday, July 4   Independence Day



 Monday, September  Labor Day



 Monday, October 1  Columbus Day



 Friday, November 11   Veterans Day



 Thursday, November 2  Thanksgiving Day



 Friday, November 2  Black Friday 



 Friday, December 2  Christmas Day Observed



Employer Guide to Form 1094-C and 1095-C Reporting Requirements under the Affordable Care Act (ACA)

FAQ GuideIn January of 2016, one of the major reporting and compliance provisions of the ACA, the Affordable Care Act or Obamacare, will take effect. Some employers will have to provide the IRS and their employees with forms 1095-C, often referred to as a “Health Care W-2,” and form 1094-C, the company summary form. This article will provide a Frequently Asked Question (FAQ) guide to these forms and many of the common terms needed to understand and work with these forms.

What companies have to provide the 1094-C and 1095-C Forms?

Companies that have over 50 (Full Time employees plus Full Time Equivalent (FTE’s) employees) in the calendar year must provide these forms. These companies are called Applicable Large Employers (ALE’s.) Full time employees are employees that work 130 or more hours in a month. FTE’s are calculated by adding up the hours in a month worked by the remaining workers (up to a maximum number of 120 hours per employee) and dividing by 120. A simple example would be 3 employees that work 80 hours each in a month would equal 2 FTE’s or (80+80+80)/120= 2. A company adds its full time employees to its FTE’s each month to determine whether it is an ALE. Checkright’s new ACA Monitor software module will complete these calculations.

What information is reported on these forms?

IRS Form 1095-C

IRS Form 1095-C (Click to Enlarge)

Each 1095-C form includes the company name, EIN, address, and phone number as well as the employee name, address, and social. The form then has a month by month section where a code letter is placed. In simplest terms, the code corresponds to whether the employee elected to have health insurance, did not qualify for health insurance, or declined health insurance. There are actually quite a few other codes, but the presence of health insurance, and, if not, why not, are what the codes represent. The form also asks for the employee deduction amount of the least expensive insurance available to the employee. The forms also contain areas where companies report other information about their employees and their health insurance plans. An example of the 1095-C form is shown in the image to the right. Checkright’s ACA Monitor, once set-up, will populate all lines of these forms with all the applicable data and codes.

Who will complete these forms? 

Checkright will work with our ALE customers to prepare these forms on our new ACA Monitor that is built into our payroll software. Our software already contains all of the employee census, hour, wage, and deduction information, all of which will be used to prepare the 1095-C forms. There is some additional information that will be needed. Checkright will send an ACA Questionnaire to collect all the necessary data.

Why do we need a new payroll software module to complete these forms? 

Most of the data necessary to complete these new forms is contained in the payroll and employee records in our software. But, the arrangement and presentation of the data for these forms is entirely new. Our payroll software has been tracking employee hours worked. The new module will group the employees by month into Full Time and Part Time status, calculate Full Time Equivalents, and even alert our clients when employees are misclassified. Similarly, our payroll records contain health insurance deduction information, but now the new platform will recognize that the deduction signifies that the employee has accepted health insurance coverage and provide the correct code for that month for the 1095-C form. The ACA Monitor will not only produce the required forms, but it will also be the company administrator’s ongoing tool for making sure employees are classified correctly and eligible or ineligible for benefits, all on one dashboard.

When are the forms due? 

Eligible employers must distribute these forms to their employees by January 31st. Checkright will supply the completed forms during the third and fourth week of January for your employees and will submit the agency copies to the IRS. These forms will now be required each year at this time.

Employee-counts (2)What if the same owner(s) have more than one company with employees? 

The IRS defines a group of companies (2 or more) as a controlled group if the same people or company owns or controls all companies in the group, even if the companies have different Employee Identification Numbers and different locations. In the case of a controlled group with a grand total of over 50 Full Time plus FTE employees, the reporting is required for all employees of the controlled group, even if the employee counts of some members of the group are under 50.

What if a company does not provide these forms? 

Under the Affordable Care Act, the penalty for not providing these forms is $250 per form (per employee) for the 1095-C forms. There are additional penalties that would be assessed at the company level. These are different penalties than the penalties that exist for an ALE that does not offer health insurance to its employees.

What other information will be needed to complete these forms? 

Each company will need to consult with its health insurance broker in order to provide the company Measurement Period, Initial Assessment Period, Stability Period, and Administrative Period. Each company will also have to know whether any of its health insurance plans is considered Self-Insured. The company will need to provide the employee payroll deduction amount per month for the lowest cost, compliant, single-only health insurance plan the company offers. Finally, each company will need to have the dates of all employees who declined health insurance in 2015 (use January 1st for employees that declined health insurance in a past year.)

What is the company Measurement Period?

The Measurement Period refers to the time, a number of months, during which the company counts its employees’ hours in order to determine the full time status and health insurance eligibility for each employee. The company is measuring the amount of hours worked. Common measurement periods are 12 months or 6 months. An example would be an employee works for a company with a 6 month Measurement Period and works 850 hours in that time. Since the hours worked are more than 130 (minimum) x 6 = 780, the employee is considered full time and must be offered benefits. Checkright’s ACA Monitor automatically applies the Measurement Period to each employee in the company to determine eligibility.

What is the Initial Assessment Period? 


The Initial Assessment Period is the amount of time between hire date and eligibility for benefits for an employee. By far the most common Initial Assessment Period is the second first day of a month following hire date. An example of that would be an employee that was hired October 7th would be eligible for benefits December 1st. That time period between October 7th and December 1st is the Initial Assessment Period. Checkright’s ACA Monitor will use the hire date to alert our customers as to when their employee’s Initial Assessment Period is over and the employee is eligible for benefits.

What is a company’s Stability Period? 

The Stability Period is the period of time after the Measurement Period in which an employee’s eligibility for benefits can’t be changed. The Stability Period can’t be shorter than the Measurement Period and must be at least 6 months. What that means is that if a company measured an employee’s hours worked for 6 months and determined that the employee worked enough hours to be eligible for benefits, that classification can’t change during the Stability Period, even if the employee begins to work fewer hours.

What is the Administrative Period? 

The Administrative Period is the short period of time after the Measurement Period in which companies have some time to contact and enroll newly eligible employees for health benefits. Not every company will utilize an Administrative Period, but if the company does, the company will not be fined for failing to offer benefits during that time.

What do you mean by the question, is our company health plan considered Self-Insured and what does that matter for these forms?

From HealthCare.gov, a Self-Insured plan is a “Type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims.” The reason this information is necessary is that if a Self-Insured Plan is present, all spouse and dependents covered by the plan must be listed on the 1095-C form for that employee, and a different form code is used. Checkright will need to know about the presence of a Self-Insured plan so we can set up the ACA Monitor correctly to allow for the input of spouse and dependent information.

Why does my company need to provide the employee deduction amount for our lowest cost single health plan? 

One of the items that must be reported on the 1095-C forms is whether the lowest cost, single plan meets the ACA definition of affordable. Checkright’s ACA platform will use the gross wage data for each employee to determine whether the company plan meets the minimum affordability level and then place that data on the 1095-C.

Legal Disclaimer: The information presented in this article is meant to be interpreted in a general manner and should not provide specific instruction on Forms 1094-C, 1095-C, or complying with any of the specific regulations of the ACA. All readers should seek specific legal and tax advice from their attorney or CPA. The subject matter in this article is periodically revised by the IRS and this article may not be revised in the future. Neither Checkright nor the author warrant the accuracy of this text, but instead, present it as a means for the reader to begin to familiarize himself with the 1094-C, 1095-C forms and other ACA regulatory provisions.

Avoiding Employee Misclassification Under the Fair Labor Standards Act

employee-puzzle-02New guidance is available for employers on how to avoid misclassifying employees as independent contractors for purposes of the federal Fair Labor Standards Act (FLSA), which sets basic minimum wage and overtime pay standards. According to the guidance, most workers are employees under the FLSA

To determine whether a worker is an employee or an independent contractor under the FLSA, courts and the U.S. Department of Labor use the multi-factor “economic realities” test, outlined below, which focuses on whether the worker is economically dependent on the employer or truly in business for him or herself:

1.     Is the Work an Integral Part of the Employer’s Business?

If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer. A true independent contractor’s work, on the other hand, is unlikely to be integral to the employer’s business.

2.     Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?

This factor should not focus on the worker’s ability to work more hours, but rather on whether the worker exercises managerial skills and whether those skills affect the worker’s opportunity for both profit and loss.

3.     How Does the Worker’s Relative Investment Compare to the Employer’s Investment?

The worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business. The worker’s investment should not be relatively minor compared with that of the employer. If the worker’s investment is relatively minor, that suggests the worker and the employer are not on similar footings and that the worker may be economically dependent on the employer.

4.     Does the Work Performed Require Special Skill and Initiative? 

A worker’s business skills, judgment, and initiative—not his or her technical skills—will aid in determining whether the worker is economically independent.

5.     Is the Relationship Between the Worker and Employer Permanent or Indefinite?

Permanency or indefiniteness in the worker’s relationship with the employer suggests that the worker is an employee. However, a lack of permanence or indefiniteness does not automatically suggest an independent contractor relationship. The key is whether the lack of permanence or indefiniteness is due to operational characteristics intrinsic to the industry, or the worker’s own business initiative.

6.     What is the Nature and Degree of the Employer’s Control?

The employer’s control should be analyzed in light of the ultimate determination of whether the worker is economically dependent on the employer or truly an independent businessperson. The worker must control meaningful aspects of the work performed such that it is possible to view the worker as a person conducting his or her own business.

November Payroll Calendar Unfavorable: Start Planning Early

November Payroll CalendarNovember represents a time of pumpkin-spice everything, family, and good food. It also brings with it two Federal holidays, which may result in an earlier check date or submission deadline for your payroll. Check dates that are normally scheduled on a day that coincides with a Federal holiday or weekend are adjusted to the prior Federal business day. Also, if you offer direct deposit and the Fed is closed within the two days leading up to your check date, payroll must be submitted one day earlier.

The Fed is closed on Veteran’s Day, November 11th and Thanksgiving Day, November 26th. Checkright will be closed on Thanksgiving Day and Black Friday, November 26th and 27th. Payrolls with check dates from November 10th through November 13th and November 25th through December 1st, may need to be processed earlier than usual. Please note, if your payroll normally falls on the 15th, your check date has been moved up to the 13th.

Employers most affected are those with certain bi-weekly schedules and those with payrolls normally dated for the 15th and end-of-month. For these employers, the earlier submission deadline may result in the need to estimate hours worked or take other actions.

Please contact your Checkright payroll specialist to develop your strategy for accommodating these holidays.

Proposed Changes to Overtime Eligibility Rules for ‘White Collar’ Workers

white collar workerThe U.S. Department of Labor is proposing to update the rules governing which executive, administrative, and professional employees (“white collar workers”) are entitled to the minimum wage and overtime pay protections of the federal Fair Labor Standards Act (FLSA). In part, the updated rules would result in an increase in the number of employees who would qualify for overtime pay, by significantly increasing the wage threshold under which employees must be paid overtime.

The current federal rules provide an exemption from both the FLSA minimum wage and overtime pay requirements for bona fide executive, administrative, and professional employees who meet certain tests regarding their job duties and who are paid on a salary basis at not less than $455 per week ($23,660 per year). The agency’s proposed rule would raise this salary threshold from $455 a week to a projected level of $970 per week ($50,440 annually) in 2016.

Other highlights of the proposal include changes to the total annual compensation requirement needed to exempt highly compensated employees from the FLSA’s minimum wage and overtime pay protections, and the consideration of two alternative mechanisms for automatically updating the salary and compensation levels going forward.

Unless exempt, employees covered by the FLSA must receive the federal minimum wage of at least $7.25 per hour and overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. (Note: When both the FLSA and a state law apply, an employee is entitled to the most favorable provisions of each law. Be sure to check your state’s wage and hour laws for requirements related to minimum wage, overtime, and exemptions.)

Susan G. Komen Race for the Cure

Checkright is proud to announce its participation in the 2015 annual Susan G. Komen Race for the Cure, held every May in Richmond, VA. Checkright sponsored each staff member’s registration and encouraged employees to raise pledges for the walk. Checkright also matched the first $500 of employee-raised pledges. Checkright employees raised over $1,300 in donations.We were also joined by several friends and family members.

The Race for the Cure raises funds which are used for breast cancer research and local education, as well as, screening and treatment programs. To learn more about Susan G. Komen go to: http://ww5.komen.org/.