HR Tips

Arizona has once again made changes to its withholding.  The new changes are for wages paid after December 31, 2010.

The changes include:

• Removal of the $15,000 annual compensation threshold
• Providing an additional withholding percentage of 0.8%
• Relaxing exemption requirements

The new A-4 fillable form can be found at:

http://www.azdor.gov/LinkClick.aspx?fileticket=d09gDuk70nc%3d&tabid=265&mid=921

How AZ taxes are computed

Arizona’s withholding tables are based on a percentage of gross taxable wages. These “gross taxable wages” is the amount that meets the federal definition of “wages” that is generally included in box 1 of the employee’s federal W-2.

Taxes for Non-residents working in Arizona

Arizona employers should note that an employer must withhold Arizona income tax form the payment of wages to an employee whose compensation is for services performed in Arizona whether they are a resident or non-resident of Arizona.  There are a couple of exceptions to the withholding requirements that can be found on the State of Arizona’s website at http://www.azdor.gov/Business/WithholdingTax.aspx

New Federal W-4

The 2011 Federal W-4 can be found on the IRS website at:

http://www.irs.gov/pub/irs-pdf/fw4.pdf

On January 1, 2011 Arizona will raise the minimum wage to $7.35 per hour.  This will be at 10-cent raise over the present state minimum wage and 10-cent raise over the Federal Minimum wage of $7.25.  Arizona’s minimum wage for tipped wages will also increase 10 cents to $4.35 per hour.

Whose Minimum Wage is in affect?  A State’s or the Federal’s?

Employers must pay Federal minimum wage if their jobs are subject to Fair Labor Standards Act (FLSA).  If they are not subject to FSLA then state, city, or other local laws may determine the minimum wage.

Federal minimum wage law supersedes state minimum wage laws where the federal minimum wage is greater than the state minimum wage. In those states where the state minimum wage is greater than the federal minimum wage, the state minimum wage prevails.

Arizona will be one of 14 states whose minimum wage is more than the federal minimum wage as of January 1st.  Presently the highest state’s minimum wage is $8.55 in the state of Washington.

The lowest state’s minimum wage for years was set at $2.65 by the state of Kansas. In January of this year they raised their minimum wage to meet the Federal level.  The four states that do not have state minimum wage laws are: Alabama, Louisiana, Mississippi, and South Carolina.  There are also five states that have minimum wage set lower than the Federal Minimum wage.

To whom does the minimum wage apply?

Employers must pay Federal minimum wage if their jobs are subject to Fair Labor Standards Act (FLSA).  If are not subject to FLSA then state, city, or other local laws may determine the minimum wage.

The minimum wage law (the FLSA) applies to employees of enterprises that have annual gross volume of sales or business done of at least $500,000. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mail or telephones for interstate communications.

Other persons, such as guards, janitors, and maintenance employees who perform duties which are closely related and directly essential to such interstate activities are also covered by the FLSA. It also applies to employees of federal, state or local government agencies, hospitals and schools, and it generally applies to domestic workers. (So just about everyone!).

Exemptions

The FLSA contains a number of exemptions from the minimum wage that may apply to some workers.  These exemptions can be found the DOL’s website at http://www.dol.gov/elaws/esa/flsa/screen75.asp.

Employers offering prescription drug coverage must notify employees BEFORE November 15!

The Medicare Modernization Act (MMA) requires companies (whose policies include prescription drug coverage) to notify Medicare eligible policyholders whether their prescription drug coverage is creditable coverage.  This means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.

Two Notices are required

Employers who offer prescription drug coverage must notify employees and The Centers for Medicare & Medicaid Services (CMC) whether their prescription drug coverage is “creditable” or “non-creditable” for purposes of Medicare Part D.   The CMS is the federal agency, which administers Medicare, Medicaid, and the Children’s Health Insurance Program under the U.S. Department of Health Services.

Each year this agency requires employers to review their prescription benefits and confirm that they are either “creditable” or “non-creditable” and provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to November 15th each year and at various times as stated in the regulations.  (For full regulations go to https://www.cms.gov/CreditableCoverage/01_Overview.asp#TopOfPage ). Then the employer needs to notify their employees if the company offered prescription benefit is “creditable” or “non-creditable”.

Employers must also provide the Disclosure to CMS Form to CMS within 60 days after the beginning date of the Plan Year.

Note: The agency not only requires initial notification but also requires notification when the company no longer offers prescription drug coverage or changes the coverage offered which results in the coverage creditability status changes. (e.g. from creditable to not creditable or vise versa).

What Employers should do now

1.      Find out if your prescription drug coverage is “creditable” or “non-creditable” for Medicare Part D/CMC purposes.  This can be done by contacting your benefit broker, if you use one, or by contacting your benefit provider directly.

2.      Develop the notification to employees for “creditable” or “non-creditable” coverage.  The CMS website has a model notice:

Creditable Coverage:

http://www.cms.gov/CreditableCoverage/Downloads/Model_Creditable_Coverage_Disclosure_Notice_01_01_2009.pdf

Non creditable coverage:

http://www.cms.gov/CreditableCoverage/Downloads/Model_Non-Creditable_Coverage_Disclosure_Notice_01_01_09.pdf

Note: the website has these forms in both English and Spanish

3.      Send notice to your employees and dependants enrolled in your prescription drug plan who are eligible for Medicare Part D (or send the notice to all your prescription plan enrolled employees to ensure that you have not missed anyone).

4.      Complete and submit the CMS Disclosure Form to CMC if you have not done so already for your plan.  The CMS link to submit is:

https://www.cms.gov/CreditableCoverage/45_CCDisclosureForm.asp#TopOfPage