As part of the new stimulus package, many workers will be seeing a little extra cash in their paychecks beginning this month—in the form of a reduced federal income tax withholding called the Making Work Pay Tax Credit. For employers, this means that payroll calculations need to be adjusted to ensure that the lowered withholding rate is applied to employees’ paychecks.
Employees are eligible to receive the 6.2% tax credit if they earn less than $75,000 for individuals or $150,000 for married couples. Low wage workers who earn too little to have federal income taxes withheld will not see an increase in their pay now, but will be able to claim the tax credit with their 2009 federal income tax returns. Of course, the exact amount credited to individual employees will vary depending on the number and type of deductions claimed. The Internal Revenue Service estimates, however, that employees will see an additional $10 to $15 per week in their paychecks.
Are you ready to comply with the new COBRA notice requirements? Find out by ordering a CD recording of our recent audio conference specifically for California employers: COBRA Subsidy: What You Need to Do Now to Comply with the American Recovery and Reinvestment Act’s Health Insurance Continuation Provisions.
How To Survive an Employee Lawsuit: 10 Tips for Success
With lawsuits against employers becoming ever more common—and jury verdicts skyrocketing—your risk of getting sued has increased dramatically even if you’ve done all the right things. Learn how to protect yourself with our free White Paper, How To Survive an Employee Lawsuit: 10 Tips for Success.
In order to ensure that employees receive their tax credits, employers must adjust the federal withholding tables used to calculate income tax withholdings. Updated withholding tables are available from the IRS website here, along with instructions for using the tables.
The withholding tables are structured so that payments starting in April will add up to $400 for individuals and $800 for married couples by year end. If payments start sooner than that, an employee may actually receive a bit more than he’s due by December 31. However, there’s no penalty if an employer doesn’t start the withholding before the end of April/beginning of May—employees can still claim any remaining credit owed to them on their tax returns.
We’ll have the full rundown on all the employment-related features of the stimulus package in an upcoming edition of CEA.
April 18 Deadline for Complying with New COBRA Notice Requirements
The DOL set a deadline of April 18 for employers to comply with new model notices.
If you sponsor a group health plan, you won’t want to miss a CD recording of our April 14 audio conference all about the latest developments concerning the COBRA subsidy, including special considerations for California employers and how ensure that you’re in compliance by the deadline.
The conference will explain the fundamental aspects of the subsidy. We’ll also provide crucial insight into the subsidy’s payroll and tax implications and answer questions you may have about the DOL’s model notices.
Our expert—a seasoned California-based employee benefits attorney—will teach you how to determine which “assistance eligible individuals” (AEIs) should receive which notice and why, and she’ll discuss Cal-COBRA requirements that could affect your notice obligations. You’ll also learn:
- When AEIs may be eligible to change their benefit elections, and the deadline for them to make those changes
- What impact the subsidy may have on pre-existing condition limitations
- How to evaluate when the COBRA premium subsidy ends
- The subsidy’s payroll and tax implications for your organization
- Which California employers are subject to the federal notice and which are not, and why
- How to evaluate whether you’ll need to customize the DOL’s model forms
- The action plan every plan sponsor needs to implement to ensure compliance with the notice requirements