California Payroll Conference

California Payroll Conference September 11 and 12, 2014 Year End 2014 Becky Harshberger bharshberger@ep.com 818-955-6016 desk

Agenda • IRS and CA Updates for 2015 • ACA update • CA Changes & UI fund Insolvency • All State UI outlook for 2015 • Legislative Outlook for 2015 • Communication Plan • YE Checklist

Federal and CA updates for 2015(check APA website for updates!) • FICA Base (ER) $119,100? (6.2%)=$7,384.20 • CA SDI $101,636? (1.0%) • 401(k) $ 17,500 50+ $5,500 • Mileage $ 0.565? (2013 rate) • Adoption Asst$ 13,190? • Qualified Parking $ 250? • Transit Pass $ 130? ($245 in 2013!) • Foreign earned income exclusion $99,200? • CA supplemental rates unchanged in 2015?

ACA: what payroll needs to know • On January 1, 2015 employers averaging or expected to average 100 or more FT employees (or FT equivalents) will be subject to the coverage mandate. Payroll and HR will be dealing with data collection around: • Control group aggregation • FT time status • Look back periods • In 2016, the mandate drops to 50 FT or FT equivalents • Reporting the cost of healthcare on a W2 (code DD)

ACA Lingo Full-time Workers employed at least 130 hours per month FTE Those employed that did not work 130 hours a month. For ACA adding their total hours for the month (using up to 120 hours per employee) and divide this amount by 120.

ACA Lingo: Full Time and FTE example

ACA Lingo Pay: Company chooses to pay the penalty tax of $2000 a year per employee instead of providing adequate and affordable healthcare coverage Play: Company chooses to offer compliant coverage, BUT that coverage is unaffordable to certain employees, the company will pay $3000 a year for each full time employee who obtains government subsidized coverage on the exchange

ACA Lingo Adequate: The offered coverage must cover on an actuarial basis at least 60% of the value of benefits available under the plan. For example, if the plan covers 50% of hospitalization cost, it is NOT adequate.. Affordable: If the employee’s share of premiums does not exceed 9.5% of an employees household income. For example, if the FT EE earns $50k, the employee cannot pay more than $395.83 toward monthly premiums ($50k x 9.5%/12).

ACA and Payroll • New Forms • 1095 A • 1095 B • 1095 C • 1094 A • 1094 B • 1094 C • W2 Box 14, Code DD

FUTA tax rate basics

2014 FUTA credit reduction states BCR rates updated by DOL on 28 July 2014

FUTA tax rate basics

FUTA wage base increase

2014 SUI financing at a glance

CA SUI Fund still insolvent • The Unemployment Insurance (UI) fund has a revised projected deficit of $9.5 billion by the end of 2014, according to a new report released by the Employment Development Department. • Sacramento has a number of groups interesting in changing UI wagebase and in ways to pay off the debt….

When employees change their work state

Unemployment insurance integrity

Tax rate management Penalty rates for late filers/payers

Ernst & Young LLP’s 2014 pick of six to watch for future cost increases

Communication Plan

Communication Plan To Joe/Jane Employee • Update your W2 mailing address • Date of last paycheck for 2014 • When to expect W2 • 2015 W4’s (exempts) • What to do if you think you’re W2 is wrong • What to do if W2 is lost • 2015 limits • FICA • CA SDI • Mileage • 401(K)….50+ catch up • Flexible spending deadlines and new elections Memo distribution: email, common areas, website, stuffer, inner office mailer

Communication Plan • Communication with AP for reportable reimbursements (those that initially didn’t go through payroll….taxable relocation, life insurance, exec perk’s…) • Communication with Executives • Make ‘em feel special, send them a separate letter of information, set up a particular person to deal with exec or exec tax preparer

Communication Plan for 2015 • IRS and state changes happen through out the year, how effectively are you communicating them to employees?

Year End Checklist for you Create a checklist for your team that includes • What you need • Who is responsible for getting it to you • The date you need it Ensure accountability with calendars and emails

Payroll Dept checklist • Verify all stop pymts, voids and manual checks have been processed • Schedule an out of sequence payroll for any adjustments in advance • Schedule a bonus payroll! • Recon 401(k) and the employer match, true up if needed • 1099 processing? (if you are responsible for A/P) • Backup your database (in-house systems)

Seven Deadly Sins to Avoid: • Gluttony – Fixing all dimensions of a YearEnd. • Lust – Intense or unrestrained craving for YearEnd features. • Sloth – Failing to do high quality work at all times. • Opaqueness – Obscuring the progress, quality or other attribute of a project. • Pride – Believing that we know everything to produce YE • Wastefulness – Misuse of critical resources • Myopia – Not seeing beyond your own work

Thank you for your attention

California Payroll Conference