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February HR News Worth Review

By Higginbotham on February 12 , 2018

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IRS Issues New Tables for 2018 Tax Withholding

Starting Feb. 15, 2018, employers must use new tables to determine how much income tax to withhold from their employees’ paychecks. The Internal Revenue Service (IRS) issued the required new tables in Notice 1036 on Jan. 9, 2018. 

The notice contains early release copies of the “Percentage Method Tables for Income Tax Withholding” that will appear in IRS Publication 15 (Employer’s Tax Guide). According to the IRS, Notice 1036 is the first in a series of steps that the agency will take to help employers improve the accuracy of their tax withholdings under changes made by a new tax reform law, the Tax Cuts and Jobs Act, enacted on Dec. 22, 2017.

Employer Takeaway
Employers should become familiar with the new tables and begin using them as soon as possible, but no later than Feb. 15, 2018, and monitor the IRS’s Notice 1036 website for future guidance regarding income-tax withholding under the Tax Cuts and Jobs Act.


New Rules for Disability Claims Will Take Effect on April 1, 2018

In 2016, the U.S. Department of Labor (DOL) released a final rule to strengthen the claims and appeals requirements for plans that provide disability benefits and are subject to the Employee Retirement Income Security Act (ERISA). The final rule was scheduled to apply to claims that are filed on or after Jan. 1, 2018. However, on Nov. 24, 2017, the DOL delayed the final rule for 90 days, until April 1, 2018, to give stakeholders the opportunity to submit comments on the final rule’s benefits and costs. According to the DOL, the information it received during the delay period did not justify modifying or rescinding the final rule. Thus, the final rule will take effect without change. Therefore, on Jan. 5, 2018, the DOL announced that, effective April 1, 2018, employee benefit plans must comply with new requirements for disability benefit claims.

The final rule includes the following provisions for processing claims and appeals for disability benefits:

  • Improvements to basic disclosure requirements;
  • Rights to claim files and internal protocols;
  • Rights to review and respond to new information before final decisions;
  • Conflict of interest rules;
  • Deemed exhaustions of claims and appeal processes;
  • Notices written in a culturally and linguistically appropriate manner; and
  • Certain coverage rescissions are adverse benefit determinations subject to the claims procedure protections.

Employer Takeaway
ERISA plans that include disability benefits must comply with the new procedural protections, effective for claims that are submitted after April 1, 2018. Entities that administer disability benefit claims, including issuers and third-party administrators, will need to revise their claims procedures to comply with the final rule.


DOL Announces New Standard for Unpaid Interns

On Jan. 5, 2018, the U.S. Department of Labor (DOL) announced that it would adopt a new standard for determining whether interns and students are “employees” who must be paid under the Fair Labor Standards Act (FLSA). The DOL clarified that, going forward, it would abandon its six-part test and instead apply the “primary beneficiary” test used by federal courts. The six-part test provided that an intern at a for-profit company is not an employee unless all six factors of the test were met. The primary beneficiary test has a more flexible approach, focusing on whether the intern or the business benefits more from the relationship.

The primary beneficiary test considers the “economic reality” nature of the employment relationship and includes seven factors. However, unlike the six-part test, these factors provide only a frame of reference to determine who benefits more from the intern-employer relationship.

The seven factors are:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee, and vice versa;
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Not every factor must be met, and not all factors must be given the same weight during the analysis. Instead, the courts will consider these seven factors and evaluate whether, in the totality of the circumstances, the employer benefits more from the relationship than the intern. When an employer is the primary beneficiary of the relationship, the intern is an employee for purposes of the FLSA. When the intern is the primary beneficiary, he or she is not considered an employee under the FLSA.

Employer Takeaway
Employers should review how the primary beneficiary test applies to interns at their organizations and make sure that any unpaid intern programs primarily benefit their interns and not their organization. The DOL has provided an updated fact sheet for employers to use in this regard.

 

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Tags: Compliance

  
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