Any employee earning less than $455 a week will be a nonexempt employee entitled to overtime pay.

The percentage restrictions on nonexempt work in the current ‘long’ duties tests are eliminated.

The regulations will take effect on August 23, 2004.

The compensation threshold for the ‘highly compensated employee’ exemption is raised to $100,000.

Without affecting their employees’ exempt status, employers may take deductions from accrued leave accounts.

Commonwealth of Virginia in their recent bill actually created some barriers:  The bill mandated the creation of trust accounts when employers set up payroll debit card programs.  A trust account would be set up for each employee in the program with the employee named as the beneficiary.  The general practice has been to set up a single aggregate account and this trust concept could make these programs cost prohibitive.  They will work on correcting some of the language which would eliminate this trust requirement and naming a beneficiary.

The Delaware Department of Labor issued proposed regulations to allow employers to issue payroll debit cards to workers as long as they provide the functional equivalent of cash or a check that allows full payment of wages on the worker’s payday without cost to the worker.  Proposed regulations would allow employers to pass on some of the administrative costs associated to a payroll debit card program to the unbanked worker who voluntarily signs up for the employer’s program.  However, Delaware is also proposing “individual accounts” and setting up individual accounts for each worker’s debit card may be too expensive for an employer.

On March 14, 2004, the San Francisco Chronicle ran an article highlighting the fact that some California banks have begun charging a $5.00 fee to workers who cash their paycheck without having an account at that bank.  This new policy even applies to workers who present their paycheck at a local branch of a bank where their employer’s payroll account is actually held.  

The California Department of Industrial Relations (CDIR) has ruled that employers who allow such a fee to be charged to their workers when they cash their paychecks at the employer’s bank were in violation of Section 212 of California’s labor code.  When the CDIR becomes aware that an employer has violated Section 212 of the California Labor Code, the CDIR can fine the employer $100 for the first time a fee is charged to a worker to cash their paycheck.  For each subsequent violation, the CDIR can assess a $200 fine on the employer, plus an additional 25% of the amount deducted from each of the worker’s paychecks. 

On May 31, 2004, APA joined a panel of speakers to testify before the California State Senate Banking, Commerce & International Trade Committee to discuss the impact of these bank fees on workers, employers, and payroll professionals.  The purpose of this initial hearing was to help legislators gather information about the entire issue so that they may potentially create a legislative solution for this employer problem.

Nevada mandated a new child support withholding fee of $2.00 for each employee effective July 1, 2003.  This new employer-collected fee is required to be sent separately to the Nevada State Treasurer and cannot accompany the child support garnishments that are collected and remitted to the state.

Employers are not required to withhold the fee until they receive official notification from the state in the form of a mass mailer or a revised income withholding notice.  Out of state employers are not required to collect the fee.  However, if they are collecting the option $3.00 employer cost recovery fee, then they should collect and remit the new $2.00 withholding fee.

Effective January 1, 2004, Massachusetts implemented new regulations that obligate employers to remit child support payments via EFT once they achieve a threshold of five or more child support withholding orders.  This mandate also applies to employers who have a payment history with the Child Support Enforcement Division of the Department of Revenue that includes two or more checks that have been returned for insufficient funds or irregular/untimely payments.

An employer who is required to participate in this new EFT child support remittance program must register with the agency before transmitting funds and must validate employees’/obligor’s personal identifying information with the agency’s child support enforcement automated data system.

Employers using payroll service providers may elect to have their provider remit these child support withholding funds electronically to the Department of Revenue’s Child Support Enforcement Division.

Annual deferral limits for 401k, 403b, SEP, and 457:  2004: $13K; 2005: $14K; 2006 and forward: $15K

Catch-up allowed for participants who will turn 50 during the plan year (not limited by any other plan or discrimination rules):  2004: $3K; 2005: $4K; 2006 and forward: $5K

All the states with an income tax follow these changes, except for:  NJ – follows EGTRRA for 401k, but does not exempt contributions to other deferred compensation plans (457, 403b, SIMPLE, and SEP).  PA – 401k and all other employee-deferral retirement plans are completely taxable.

Form 941, State Code Box:  Clarified for EFTPS users that you should indicate the state of the bank branch from which taxes are paid, if it is different than the state in the employer’s address on the 941.  Look for the redesign of Form 941.

W-2 box 10, Dependent Care Benefits:  Forfeitures do not have to be subtracted from the amount to be reported.

W-2 box 11, Nonqualified Plans:  Instructions will be updated with APA-written language.

W-2 box 12, Instructions tell employers to combine regular and “catch-up” contributions into a single sum for each code.

W-2 box 13, Instructions use APA-written language explaining when to check the “retirement plan” box.

Form W-4, directly underneath the title of the part of the form that the employee provides to the employer, states:  “Your employer must send a copy of this form to the IRS if (a) you claim more than 10 allowances or (b) you claim “Exempt” and your wages are normally more than $200 per week.”

Fill-in version of Forms W-2c and W-3c are available on the APA Web Site

	www.americanpayroll.org/news/formW2c.html
	Note:  Fill out the form on your computer screen, print out all copies you need, give it to your employee, and file it with the SSA.  The Social Security Administration has approved this form.