In preparation for year-end and the beginning of the new year, ADP Comprehensive Services will be sending monthly newsletters through January to assist you with your year-end planning and the ADP year-end process.
In addition to these newsletters, please watch for special ADP WFN Comprehensive Services communications detailing important year-end and new year information, such as minimum wage rate changes for the first payroll of 2017. Employers should carefully review these changes and their impacts to employees during their planning for the new year.
To follow is the November newsletter. Please carefully review the action items and contact your Service Team with any questions.
REMINDER: Complete the Year-End Survey
Your Comprehensive Services Team is committed to partnering with you for a successful year-end. Please take a moment to complete the “2016 Year-End Readiness Survey” by clicking the link below. Your participation will enable us to better assist you during this critical time of year.
https://www.surveymonkey.com/r/HCYSSST
Important Year-End Employer Notification
Each year by December 1, the IRS requires all employers to distribute an information memo to their employees to review their federal Form W-4, Employee’s Withholding Allowance Certificate information for the next calendar year. If employees know that their federal filing status, exemption allowances, or exempt status has or will change since the last filing of their Form W-4, they are required to complete a new Form W-4. Employees claiming “exempt” from withholding during the current tax year are required to submit a new Form W-4 to their employers by February 15, 2017 in order to maintain their “exempt” status. The 2016 exemption expires on February 15, 2017.
This is also a good time to have employees review their name and social security number, in the ADP Portal, to be sure they match exactly how it is printed on their Social Security Card. This will minimize the number of rejected Forms W-2 and Forms 1095-C (ACA reporting). It is also important for employees to review their mailing address, filing status, exemption allowances, and exempt status for state and local withholding purposes as well.
The information memo employers distribute can also include information about the distribution of the Forms W-2; how employees can request reissued Form W-2 statements; the 2016 social security and Medicare tax rates and wage limits; any state legislative information impacting employee pay; and the employer’s holiday and 2017 pay schedules.
It is a recommended best practice to communicate the changes that will affect employees prior to the beginning of the new year or with the first pay check of the new year. The attached template communication can be customized and used to communicate these changes to your employees.
2017 Bank Holidays and ADP Closing Dates
The following days are the 2017 bank holidays; an asterisk indicates an ADP closing day:
January 2*, New Year’s Day (observed)
January 16, Martin Luther King Day
February 20, President’s Day
May 29*, Memorial Day
July 4*, Independence Day
September 4*, Labor Day
October 9, Columbus Day
November 10, Veteran’s Day
November 23*, Thanksgiving Day
December 25*, Christmas Day
*ADP Closed
Although your pay date might not fall on a bank holiday, you may need to schedule your ADP input, delivery, or both, a day or two earlier if the banks are scheduled to be closed. Review your payroll input and delivery dates. Additionally, direct deposit items are not sent to the banks on the days when either ADP or the banks are closed.
If you are using the ADP Tax Filing Service and your pay date falls on a bank holiday, ADP will impound your taxes on the first business day prior to the holiday.
Year-End Webinar
To aid you in your year-end preparations, we are pleased to offer the Year-End Webinar for our ADP WorkforceNow® Comprehensive Services clients. This valuable webinar is offered at no charge to you and will guide you through information to help ensure a smooth year-end process for you and your organization. We encourage you to take advantage of this valuable session.
Topics include:
What’s New for 2017 – Including the latest Affordable Care Act (ACA) impacts
Year-End Timelines and Activities
Bonus and Final Payroll Processing Reminders
Quarter-End / Year-End Reports
Please check your email for the Payroll Alert notification for this event and register by clicking on the appropriate link.
If you have any questions about the year-end webinar or the dates it is being offered please contact your Service Team.
Review Quarterly Tax Verification Letter
The Quarterly Tax Verification Letter (QVL) provides the tax information ADP currently has on file for each of your company codes. A copy of the QVL can be found in iReports. Please review the following three sections of the QVL and notify your Service Team of any changes that need to be made. Please pay careful attention to the following items:
- Company Level Information
- Tax Features of the Company
- Company Features
- Tax Identification Number and/or Applied-For ID
In order to avoid agency notices, penalties or interest it is important to carefully review all tax identification numbers we have on file for your company. Some agencies do not accept applied-for identification numbers and your assigned identification number will need to be entered into our system as soon as you receive. If you find any errors in your tax identification numbers or you have applied-for identification numbers, please contact your Service Team to begin the process to correct these numbers.
2017 SUI Rate Changes
As you receive State Unemployment Insurance (SUI) Rate Change Notices from the state agencies, it is very important that this information is communicated to ADP. In order to avoid agency assessments or penalties and interest, please update the rate changes by accessing the Support Center> Payroll > Tools and Forms > Tax > SUI Rate Change.
Benefit Accrual Reset Year
Reset year is a four-digit number in the employee record that indicates the year the employee's benefit hours were last reset. The reset year displays on the AutoPay Master Control report as “RESET YR.” Reset process reconciles the employee’s hours from the past year and starts the next benefit year.
Review Qualified Pension Indicator
If applicable, the IRS requires the “Retirement Plan” box to be checked on the Form W-2. An ‘X’ indicates an employee is an active participant and automatically displays for those who have deferred compensation within the current year. The Personnel section of the Master Control report displays the Qualified Pension status for all employees and should be reviewed for accuracy. Please note, any employee coded as Qualified Pension throughout the year, even with no pay, will receive a Form W-2 with an ‘X’ in the “Retirement Plan” box.
Additional Information for Form W-2, Box 13 “Retirement Plan” Indicator
The “Retirement plan” indicator in Box 13 shows whether an employee is an active participant in your company’s plan. If this box is checked, it lets the recipient know that depending on their filing status and modified adjusted gross income, they may not be entitled to a full deduction for their traditional IRA contributions. You should check the retirement plan box if an employee was an “active participant” for any part of the year in:
a qualified pension, profit-sharing, or stock-bonus plan under Internal Revenue Code Section 401(a) (including a 401(k) plan)
an annuity plan under IRC Section 403(a)
an annuity contract or custodial account under IRC Section 403(b)
a simplified employee pension (SEP) under IRC Section 408(k)
a SIMPLE retirement account under IRC Section 408(p)
a trust described in IRC Section 501(c)(18)
a plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a 457(b) plan)
Active Participant
Generally, an employee is an active participant if covered by:
a defined contribution plan (for example, a 401(k) plan) for any tax year and is credited with any contributions or forfeitures, or
a defined benefit plan for any tax year that the employee is eligible to participate.
Do not check the retirement plan box if your company only has non-qualified or 457(b) plans.
Goal Limits
Goal limits are designed to prevent employees from going over either predefined dollar amounts, or the amount an employee has opted to contribute to a plan or loan.
Affordable Care Act
Health Coverage Cost and Form W-2 Reporting
The Patient Protection and Affordable Care Act (PPACA) requires employers to report the total cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. This reporting is for informational purposes only, to show employees the value of their health care benefits. The total cost reported includes the amounts paid by the employee and the employer.
· Reporting is mandatory for employers required to file 250 or more Forms W-2.
· Reporting is voluntary for employers that are required to file fewer than 250 Forms W-2 under the transition relief until the issuance of further guidance.
More information about the reporting can be found on the IRS website under Form W-2 Reporting of Employer-Sponsored Health Coverage.
Below is a partial list of the types of coverage that employers must report on the Form W-2 in Box 12 using Code DD. For the complete list, please visit the IRS website at the link above.
Major Medical
Dental (only if bundled with medical insurance for premium payment purposes)
Vision (only if bundled with medical insurance for premium payment purposes)
Medicare Supplement and employer paid Medicare Part B, C, D premiums*
TRICARE Supplement
Coverage for on-site medical clinics and health employee assistance programs IF available for COBRA continuation coverage
Please contact you Service Team for additional information and the procedure to include this information accurately on the Forms W-2.
W-2/1099 Authorization to Release Form
New this year, Comprehensive Services has developed an Authorization to Release Form W-2/1099. The new form is available through the Support Center or through your Service Team . The form also incorporates the request for Direct Mail.
ADP offers Direct Mail Service for your employee Forms W-2 and Forms 1099 at an additional charge. ADP will directly mail these documents to your employees’ homes.
If you would like to take advantage of the Direct Mail service, please indicate on the W-2/1099 Authorization Release Form.
Forms to Release W-2s/1099s and request regular delivery or Direct Mail, must be submitted to ADP no later than January 25th. Forms not received by January 25th, ADP will automatically produce your W-2s/1099s and deliver them to your office location.
Additional Compliance Items
FLSA – Countdown to Compliance
Changes to the FLSA white collar exemptions take effect December 1, 2016. The final regulations make the following changes:
· The new regulations impact employees who are exempt from overtime under the administrative, executive, professional (excluding doctors, lawyers and teachers), and computer related professional (if the employer is choosing to pay on a salary basis) exemptions. Remember: Outside sales workers are not subject to the salary basis or salary level tests, and are not impacted by the changes.
· The new standard salary threshold for the impacted exemptions above is $47,476/year ($913/week).
· The final rule increases the annual compensation level for Highly Compensated Employees to $134,004/year.
· The salary thresholds will automatically increase every three years beginning January 1, 2020.
· Employers are allowed to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the salary in the standard salary test. That is $91.30 per week or $4,747.60/year.
Take proactive steps to help ensure compliance with the new FLSA regulations effective December 1, 2016.
Final EEO-1 Summary Pay Data Rule
The Equal Employment Opportunity Commission (EEOC) announced its highly anticipated final requirements for revision of the EEO-1 reflecting the collection of pay data. The new pay data reporting obligation will commence on March 31, 2018. Highlights of the final rule are set forth below.
EEO-1 Report Changes for 2017. Under the final rule, the same employers will continue to submit the EEO-1 report annually to report the number of full-time and part-time employees employed in a payroll period selected by the employer, but beginning with the 2017 reporting year, employers will select a payroll period within the last calendar quarter of the reporting year (October, November, or December). For employees in the selected pay period, employers will now need to report not only their ethnicity/race and gender by job category, but also their annual employee earnings (from IRS Form W-2, Box 1) and hours worked for the full calendar year.
Pay Bands. Each employee will be classified into one of 12 “pay bands” within each job category. Employee counts will then be summarized by the 12 pay bands within the ten job categories and by race, ethnicity, and gender. A separate “Section D Hours Worked Report” details the aggregate annual hours worked for each pay band/job category/race/ethnicity and gender category.
Hours Worked. The EEOC has adopted Fair Labor Standards Act (FLSA) definitions of hours worked, which generally includes “all time an employee must be on duty or on the employer's premises or at any other prescribed place of work, from the beginning of the first principal activity of the workday to the end of the last principal activity of the workday.” Basically, hours worked includes only hours actually worked, and not all hours paid, which can include Paid Time Off. For FLSA-exempt employees, employers may report 40 hours per week for full-time employees, and 20 hours per week for part-time employees, multiplied by the number of weeks employed that year. Alternatively, employers may track and report actual hours worked by exempt employees.
Note: According to the EEOC, employers should treat hours worked in pay periods that span calendar years as follows: “If wages are actually paid in the next calendar year for work done in the last days of the past calendar year, these hours are counted in the next year, because that is when the pay is reported on the Form W-2.”
Best Practices. In order to collect the additional data required for the updated EEO-1 report, it may be necessary to coordinate between Human Resources and Payroll functions. The EEO-1 report has often been administered by Human Resources within large employer organizations. With the addition of annual W-2 earnings and hours worked, it will be necessary to include data from payroll as well as timekeeping and other systems in order to prepare the report.
While the EEOC hopes that the earnings and hours worked data will help address gender pay gaps, as well as pay disparities by race and ethnicity, the new EEO-1 many not accurately identify gender and race-based pay disparities because, among other things, the report does not reflect legitimate differentiating factors such as: years of experience, education, and tenure with an organization. For this reason, many employers may wish to simultaneously conduct their own pay equity analyses by taking into consideration these other relevant factors when pay disparities appear. Before undertaking any such self-audit, employers should consider doing so with the assistance of legal counsel.
Additional Resources
For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.
ADP fully understands the importance of timely and seamless payroll. We are committed to providing you with the best possible solutions and service to meet your needs during year-end and throughout the upcoming year.
If you have any questions or concerns, please do not hesitate to contact your Comprehensive Services Team with any questions.