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  • New For 2022: 401(k) Contribution Limit Rises   

    The IRS announced the 2022 cost-of-living adjustments (COLAs) for employer-sponsored retirement plans. Both employee and employer limits will increase due to the continued rise of inflation. Employees under the age of 50 will now be able to max out their contributions at $20,500. This is a $1,000 increase from the cap in the years 2020 and 2021. Employees aged 50 and older will continue to be able to contribute an extra $6,500 in catch-up contributions, which has been unchanged for the last two years. 

    In addition, the employer-plus-employee contribution limit will increase to $61,000 in 2022, up by $3,000 from 2021. This is particularly beneficial for employers that make an annual profit-sharing contribution. 

    When dealing with the annual limit as a contribution goal, not all employees will be able to fund the maximum amount. However, if employees consider raising their contribution rate by even 1% each year, they will see a dramatic impact at retirement. “If your employer offers a matching contribution, it’s important to try and contribute at least that percentage as a minimum,” said Tom Smith, Manager – Executive & Retirement Benefits for GMS. “Also, striving to increase your personal deferrals each year in order to eventually reach those annual contribution limits will help increase your odds for a comfortable retirement.” 

    Employees that do want to max out their contributions should check in with their employer about reaching the annual limit prior to year-end. If this occurs, employees may lose out on employer matching contributions tied to each paycheck. Certain plans allow for a year-end “true-up” contribution, so it’s best to know your company’s 401(k) plan provisions to ensure you are receiving the maximum employer match.  

    It can be challenging for both the employer and the employee to comply with these limits. Employers must ensure that their payroll systems do not accept contributions once the limit is reached. Employees also must remember that the annual limit applies to the total contributions between all 401(k) plans. Since the contribution limit is an aggregate total, employees who work at multiple jobs over the course of a year and contribute to multiple different 401(k) plans will need to self-police how much they are contributing to each plan, so that they do not contribute more than the IRS limit. 

    How GMS can help:   

    Partnering with a CPEO (Certified Professional Employer Organization) like GMS can allow you to offer 401(k) and profit-sharing plans for your employees. It’s no secret offering retirement plans is important to recruit and retain quality employees, but they do come with a lot of complexity and risk. GMS takes on the role of the fiduciary to ensure employers maintain compliance, which means that business owners do not have to waste time trying to make sense of their legal responsibilities. When you work with GMS, we will take care of the administrative tasks, auditing, and plan management.  

    Interested in cutting costs and reducing stress? Contact GMS today to get your customizable 401(k) or profit-sharing retirement plan started. 

  • New Jersey Secure Choice Savings Program   

    State-mandated retirement plans are increasingly popping up across the country. Currently, California, Illinois, Massachusetts, Oregon, and Washington already have retirement legislation active. Other states, such as Colorado, New Jersey, New Mexico, Seattle, Virginia, and Vermont have similar legislation passed. While their requirements are not yet active, implementation is scheduled – some beginning at the end of this year, and others not taking place until 2023. Finally, the states of Connecticut, Maryland, Maine, and New York also have legislation passed – but no clear implementation dates have been outlined.  

    Why Require A State-Ran Retirement Plan? 

    According to the National Institute of Retirement Security, 57 percent of working-age households have no retirement assets. Moreover, of those that do, only half an adequately prepared for a comfortable retirement – thus relying on Social Security for half of their retirement income. It’s no surprise that the looming retirement savings crisis exists for these reasons. 

    How Do These Plans Work? 

    There is a common misconception that plans must be offered as a 401(k). However, the majority of these plans will serve as Roth IRAs, which have a few key differences with a 401(k): 

    • 401(k)s have a higher annual contribution limit vs Roth IRAs 
    • Roth IRAs are after-tax, whereas 401(k)s offer pre-tax & after-tax contribution options 
    • Employers cannot match Roth IRA contributions, but can match 401(k) contributions 

    California, Illinois, New York, and Oregon are offering these Roth IRAs.  

    The New Jersey Secure Choice Program:  

    NJ Secure Choice is a state-sponsored retirement plan, aimed to close the retirement savings gap. The Program allows employees to contribute a portion of their pretax earnings to an individual retirement account (IRA) via payroll deductions. They are automatically enrolled at a 3% contribution rate, unless the employee changes said rate or opts out. Kulzer & DiPadvoa P.A. explained, “The program gives workers in New Jersey the option to invest the amounts withheld by their employers and remitted to New Jersey in a state-administrated Individual Retirement Account”. Contributions are capped at $6,000 annually, as required by IRS guidelines.  

    This Program applies to for-profit and non-profit employers in the public sector who have 25 or more employees and have been in business for more than two years. While businesses with fewer than 25 employees are not required to participate, they may choose to do so.  

    As it currently stands, this law is set to begin in March 2022, after a brief extension was granted due to COVID-19. Roll out is expected to take nine months – employers thereafter will have a grace period of 12 months if needed. This program imposes penalties on non-complying employees with a warning of up to $500 per employee.  

    Three Subjects Employers Must Follow Are:  

    1. Notice Requirement: For the first six months the board will have a process in which employers can register for the program and employers must have a packet to give to their employees that was prepared by the board.  
    2. Payroll Processes: Employers must have a retirement savings arrangement more than nine months after the board opens for enrollment. Any employees must be opted in unless they have opted out of the program. 
    3. Enrollment Of Employees: No later than three months following the date of hire, employers must enroll an employee hired more than 6 months after the Board opens the Program for enrollment.  

    GMS believes that employees should have options to receive a great retirement plan no matter how big or small your wage is. Our office in Cherry Hill, New Jersey is ready to help small businesses receive the best plan catered to their needs. We know that figuring out which plan is best for you can be stressful but offering a retirement plan is important when recruiting and retaining quality employees.  

    To learn more about our savings plans, contact us today.  

     

  • When you run a small business, offering group health insurance plays a critical part in attracting and retaining top talent. According to a study by MetLife, 81% of employees named health insurance as a “must-have” benefit, while only 3% said that it wasn’t needed. While other factors impact job decisions, it’s no secret that healthcare coverage plays a key role in making your business a more desirable place to work.

    The advantages of offering group health insurance are clear, but there is a drawback for businesses – it’s not cheap. Group health coverage can cost a small business thousands of dollars per employee, and those annual costs can add up depending on the size of your workforce. It’s also common for premiums to rise year over year.

    Want to know why premiums are getting more and more expensive? We’ll break down what impacts your premiums and why rising costs are a common trend.

    What Impacts Your Group Health Premiums?

    The cost of a group health insurance premium is driven by several different factors. Insurance companies use these different considerations to raise or lower your group’s rates. The biggest factors that will dictate how much you and your employees pay include the following categories.

    Group size and overall wellness

    The first thing an insurer considers when calculating your company’s premium is the size of the group. Larger groups tend to enjoy lower costs because other factors can be spread across a greater number of individuals, whereas small groups won’t enjoy the same economy of scale.

    In addition to size, insurers also evaluate the general health and wellness of a group. A group that presents a higher risk of costly claims is likely to pay higher insurance rates. This reality is simply because the insurer estimates how much they can anticipate in paying out for claims in any given year, which is why your premiums may be higher.

    Age of the group

    The unfortunate truth is that as an individual ages, medical issues tend to be more common. Insurers will typically use the average age of your group members to calculate your premium. If your group skews older, your premiums will likely be higher than average.

    Group member occupations

    Some occupations inherently carry more health risks than others. The level of risk based on certain industries or jobs directly impacts the cost of group insurance premiums. For example, a staff comprised mostly of accountants will present a lower risk than a group of construction workers. As such, the construction company is likely to have a higher number of claims and more expensive premiums in this scenario.

    History of claims

    Your past also plays a direct part in premium calculations. The total cost of past claims can negatively or positively impact your rates. If your group has several members undergo costly medical procedures, your premiums may increase the following year. This adjustment is the result of an insurer using current data to estimate how much your group should pay for its coverage.

    The Reasons For The Rising Costs Of Healthcare

    In recent years, the cost of offering health insurance seems to be on a never-ending upward trend. That perception isn’t an illusion – rising healthcare premiums are a real trend instigated by a variety of factors.

    Increase in medical expenses

    Demand for medical services has seen a big increase due to government programs such as Medicare and Medicaid. Many individuals who lacked coverage are now on these programs. This rise in demand and hospital visits effectively causes a similar rise in medical care costs and premiums. Prescription drug spending is also on the rise, which adds yet another layer to why the costs of health insurance keep increasing.

    Population growth

    Sometimes rising healthcare costs is simply a matter of having more patients. Our population continues to grow, which simply leads to greater national health expenditures. As a result, the overall population increase puts a greater strain on the healthcare system and leads to higher operational costs that impact everyone’s premiums.

    Advancing age of population

    The population of the United States is not only increasing, but also aging. As of 2020, there were approximately 47 million people in the United States over the age of 65. As recently as the year 2000, this number was only 31 million. The aging of the population won’t slow down anytime soon, either. It’s projected that our population will include 65 million people over the age of 65 by 2040.

    With an aging population comes increased healthcare expenses. The older we get, the more medical issues we face. Therefore, a country whose senior citizen population is increasing is going to see hospitals that are hit hard on resources. In addition, the average group age can increase, leading to a more direct impact on your small business’ premiums.

    Increase in chronic illness

    As a nation, we are facing more chronic diseases now than ever before. The largest culprit is diabetes, followed by high blood pressure and high cholesterol. Simply put, the growth of chronic illness in the country leads to long-term care and greater costs for constant coverage to treat these conditions.

    How Can a PEO Help Lower Healthcare Premiums?

    A Professional Employer Organization (PEO) allows businesses to balance the benefits of group health coverage with the costs of health care spending. A PEO like GMS can help you offer top-tier coverage through more affordable insurance options. This cost-effective approach is made possible through both economy of scale and expert benefits administration.

    Increased buying power

    When you partner with a PEO, you aren’t buying group health insurance on your own. One tremendous benefit of a PEO is that it represents many organizations rather than just yours. This network of relationships means that a PEO can treat several companies as a single group while dealing with insurance companies. This grouping of organizations means that your small business can see the same types of benefits and cost savings that can typically only be obtained by larger corporations.

    More importantly, a PEO will split its portfolio of organizations into separate groups based on their own demographics. This means that your company will not be grouped in with every other company under the umbrella of your PEO, but instead will be treated based on your own group’s ratings. This means you will see the lowest cost possible, without cutting back on your actual coverage.

    Benefits administration and payroll

    A PEO can also help ease your administrative burden by enabling your healthcare admin and payroll to integrate with one another for a streamlined process. For example, payroll deductions will be set up automatically when new employees are onboarded and opt into health insurance. Paycheck deductions can be automated, including determining what should be pre-tax and post-tax.

    The process of employees enrolling in benefits or renewing during open enrollment can also be simplified by a PEO. Dedicated account managers and online systems make it simple to educate employees on their options and help them choose their coverage elections in the same online portal.

    In short, a PEO makes your benefits administration simpler and more cost-effective. It’s almost a full-time job to simply deal with the health benefits for your employees. That’s why our experts can help you invest in quality, affordable coverage and save you valuable time by handling time-consuming administrative tasks.

    Are you ready to streamline your administrative processes? Contact GMS now to talk with our experts about all your health insurance needs.

  • No matter the size of your company, a 401(k) can play a pivotal part in a competitive benefits package. Only 48% of businesses offer some form of retirement savings plan for their employees, which makes starting a 401(k) plan all the more enticing for an enterprising business owner.

    Of course, it’s not always clear how to set up a 401(k) or profit sharing plan for your small business. Offering a retirement saving and investing plan takes a few steps, but the results can have a major impact on both your employees and your company. It’s time to break down what it takes to set up the right 401(k) for your company.

    Why Should My Small Business Offer a 401(k) Plan?

    Before you set up a 401(k) for your small business, it’s important to know why it makes sense for your company. There are several key reasons to offer this sought-after benefit.

    Attract and retain talent

    Arguably the most obvious benefit of offering a 401(k) plan is that it makes your business more competitive in the hiring market. Charles Schwab reports that 88% of job seekers named a 401(k) plan as a “must have” benefit when considering a position. That desire for a retirement plan not only makes your business more attractive as a landing spot, but also adds another way to keep your current employees satisfied.

    Improve your employees’ morale

    A 401(k) can stand as more than just a financial benefit. The act of giving your employees a retirement savings plan serves as a symbol that you value their future with your company—and beyond. 73% of Americans named their finances as the top cause of stress in their lives. By offering a 401(k), you can show employees that you care for their quality of life, which can help make them more productive and appreciative.

    Tax-deductible perks

    Another potential advantage of offering a 401(k) plan is that they can help out during tax season. First off, the IRS states that any “elective deferrals and investment gains are not currently taxed,” which means that you and your employees can enjoy tax deferral until those funds are distributed. Employers can also deduct any matching contributions up to the annual limit on their federal income tax return.

    The Four Steps for Setting up a 401(k) for a Small Business

    Once you’re ready to establish a 401(k) plan, there are some initial actions you’ll need to take for your business. This four-part process will help you go from identifying the right type of plan all the way through executing your new 401(k).

    Step One: Choose A Plan That’s Right For You

    Once you decide to offer a 401(k), it’s time to determine which type of plan is right for your business. There are many types of plan designs that offer different contribution features or advantages. This amount of flexibility allows you to determine how contributions work, create eligibility requirements and vesting schedules, and decide on whether or not to contribute to these plans. These plans include:

    • Traditional 401(k)
    • Safe harbor profit sharing 401(k)
    • Simple 401(k)
    • Roth 401(k)

    Traditional 401(k)

    The traditional 401(k) plans are arguably the most flexible option available. The plans give employers a lot of freedom in terms of profit sharing options, vesting schedules, and more. Through a traditional 401(k), employers can:

    • Contribute directly to all participants’ plans.
    • Match employees’ deferral amounts (or a portion of the deferrals).
    • Provide both contributions and matches.
    • Offer none of the above.

    Any contributions employers make can be subject to a vesting schedule, giving employers added flexibility. These schedules determine how long an employee must work for your company in order to keep part or all of your company’s contribution.

    Another key part of traditional 401(k) plans is that they are subject to non-discrimination tests with the IRS. These tests are designed to prevent businesses from favoring certain employees over others. Every year, the IRS will test traditional plans to see if the deferral percentage and actual contribution percentage don’t favor highly compensated employees key employees such as an owner. As such, you’ll need to meet these testing requirements to prevent your 401(k) from failing IRS guidelines.

    Safe harbor 401(k)

    Safe harbor plans are similar in nature to traditional plans, with the biggest difference being that safe harbor plans are not subject to the IRS annual contribution testing. In exchange for eliminating these non-discrimination tests, employers are required to make contributions to employees’ plans. In addition, many safe harbor 401(k) plans require these mandatory contributions to fully vest when they’re made.

    SIMPLE 401(k)

    If your business has fewer than 100 employees, you can also opt to offer what’s called a SIMPLE 401(k). This type of plan is also exempt from nondiscrimination testing, but does limit some of the flexibility of other plan types. For example, your business cannot offer any other types of plans and all contributions must be fully vested. SIMPLE plans also require employees to make one of the following types of contributions.

    • A matching contribution up to 3% of each employee’s pay.
    • A non-elective contribution of 2% of each eligible employee’s pay.

    Roth 401(k)

    Another option available to business owners when setting up a 401(k) is a Roth account. Roth accounts function much in the same way as a regular 401(k), except that all contributions are taxed before they’re deposited. The main advantage of this type of plan is that account owners don’t need to pay any taxes on withdrawals, including all of the investment earnings.

    Step Two: Find the right team for your 401(k) plan

    When learning how to set up 401(k) for a small business, an essential requirement is partnering with the right providers for your business. There are many different aspects of a 401(k) plan that makes it nearly impossible for business owners to do everything by themselves. That’s why these plans can involve a variety of partners, including:

    • Recordkeepers in charge of processing withdrawals and tracking contributions, earnings, losses, plan investments, expenses, and benefit distributions.
    • Advisors who help you select and maintain plan investments and potentially oversee the money management of the plan.
    • Plan administrators who handle document preparation, transaction approval, compliance filing, and other behind-the-scenes tasks.
    • Payroll providers who tie your payroll process to plan contributions and paycheck deductions.

    With the right team, business owners can successfully implement a 401(k) plan. However, that doesn’t necessarily mean that multiple providers for each role. Small businesses can choose to work with multiple vendors or find a partner like a Professional Employer Organization that can oversee and manage most, if not all, of the setup and administration for your plan.

    Step Three: Start Your New 401(k) Plan

    Now that you have the plan type and partnerships in place, it’s time to make your 401(k) official. The IRS requires businesses to take some basic actions to officially establish and run a 401(k) plan.

    Create a plan document

    Every 401(k) plan needs to start with a written document. According to the IRS, this document should serve as “the foundation for day-to-day plan operations.” In short, the document should lay out the various rights, benefits, and features of your plan. These details include:

    • When your employees are eligible for the plan.
    • A breakdown of profit sharing and employer matching (if applicable).
    • Guidelines on vesting schedules.
    • The process for handling distribution.
    • Relevant contact information for providers and internal company resources.

    Set up a trust

    The next basic action involves having any plan assets held in a trust. This step ensures that these assets only benefit the participants of the plan. Your business must assign at least one trustee to the plan. This individual or group is tasked with handling plan activities such as contributions, distributions, and plan investments.

    While this step may seem simple, it’s critical to have the right trustee in place. Trustees’ decisions will have a direct impact on your plan’s financial health, so you’ll want a person or people in place who you can trust with the financial integrity of the plan.

    Record maintenance

    Businesses are also required to set up an accurate recordkeeping system for their plans. This system should track and properly attribute several key details, including:

    • Contributions
    • Earnings and losses
    • Plan investments
    • Expenses
    • Benefit distributions

    Another reason recordkeeping systems are important is that they can help your business stay compliant with the Federal government. Every year, businesses must prepare and file an annual return/report for their 401(k) plans. The recordkeeping system makes it easier for you and your team to prepare these reports.

    Inform participants

    The final action for setting up your small business’ 401(k) plan is to notify eligible employees about your plan. This information should include key details about your plan’s benefits and requirements. These efforts should include providing employees with a summary plan description (SPD) that shares key information and discloses fees. You can also opt to provide additional information, such as education about the advantages of a 401(k) plan and employees can get the most value out of them.

    Step Four: Ongoing Maintenance

    Setting up a 401(k) for a small business is a big accomplishment, but it’s not the end of the process. An ongoing 401(k) plan requires additional work to keep it successful and compliant. These responsibilities include:

    • Regular plan maintenance
    • Ongoing nondiscrimination testing
    • Government filings
    • Employee assistance

    Find the Right Partner to Help You Set Up and Maintain Your Small Business’ 401(k)

    Let’s face it – setting up and maintaining a 401(k) plan can be an overwhelming, time-consuming process. That’s why GMS partners with small businesses to offer an attractive 401(k) or profit sharing retirement plan without the added time and hassle. GMS not only saves you time by managing your setup and ongoing maintenance, but also reduces plan costs by leveraging the group buying power as a PEO.

    Ready to set up a fully customizable retirement savings plan for your business? Contact GMS today to talk to our experts about how we can support the financial health of your employees through our large-scale 401(k) plan.

    Already a GMS client? Sign up for a 401(k) through GMS now through Aug. 31 and we’ll waive the admin fee for the rest of 2021-22! Reach out to your account manager or Tom Smith (TSmith@groupmgmt.com) to set up an appointment.

  • Your small business’ benefits package takes on added importance as it gets harder and harder to attract and retain top talent. While group health insurance may dominate headlines in terms of what job seekers want in a new role, it’s not the only health care benefit employees want. 

    Ancillary insurance can play a pivotal role in making your workplace more enticing for both job candidates and current employees. However, some businesses may see supplemental benefits like dental and vision insurance as less important than other offerings. Let’s break down how ancillary insurance works and why your small business should offer these benefits.

    What are Ancillary Benefits?

    By definition, ancillary insurance is a secondary health care benefit that’s typically purchased in conjunction with major medical coverage. These supplemental benefits are meant to enhance your existing health coverage and give employees more support for their overall well-being. Employers can also offer ancillary insurance in a couple of different forms.

    • Voluntary benefits – Employees pay 100% of ancillary premiums, but have access to lower premiums by being part of a group plan as opposed to purchasing a policy as an individual.
    • Employer-contributory benefits – The employer pays at least half of the premiums.

    While dental, vision, and life insurance are the most well-known ancillary benefits, they’re not the only options for small businesses and their employees. Ancillary benefits can also include any of the following options to enhance your benefits package.

    • Long-term care
    • Cancer and critical illness
    • Hospital indemnity and intensive care
    • Accidental death policy
    • Long-term and short-term disability

    Why Small Businesses Should Offer Vision Insurance and Other Ancillary Benefits

    Simply put, employees care about ancillary insurance. One survey asked 2,000 people to choose between a higher-paying job and a position with more attractive benefits. A whopping 88% of those individuals said that they would consider taking a lower-paying job that had better health, dental, and vision insurance – and that doesn’t even take into account the other ancillary benefits that would make your benefits package even more enticing. 

    Adding ancillary insurance for your small business not only makes your benefits package more competitive, but also shows your employees that you care about them. A little peace of mind can go a long way, so giving your employees access to ancillary insurance can save them from worrying about getting contacts or scheduling their next dentist appointment. 

    That added emphasis on your employees’ well-being can also have a direct impact on the future of your business. Employees who feel valued and are happy at work are likely more willing and able to contribute to your company’s success. That increased employee engagement can lead to a plethora of benefits for your business, including:

    • Improved retention – Businesses with engaged employees reduced employee turnover by 90%, according to Gallup.
    • Increased productivity – That same Gallup report found that engaged employees were 17% more productive.
    • Reduced absenteeism – Gallup also learned that engaged employees missed work 37% percent less than unmotivated workers.
    • Greater profitability – According to Inc., a 10% increase in productivity can increase profits by $2,400 per employee per year.

    Another major advantage of offering ancillary benefits is that they can help your employees stay healthy. Vision insurance is a great example for this. Poor vision and eyestrain will not only negatively impact your employees health, they can have a direct impact on job performance as well. 

    According to the American Optometric Association, dry eye disease can reduce employee productivity by 20 to 25%. Offering vision insurance and other ancillary benefits can go a long way toward keeping your employees happy, healthy, and productive.

    Work with a PEO to Offer Competitive, Cost-Effective Ancillary Insurance

    Running a small business is no easy task. There are countless administrative burdens that rest on your shoulders, and managing your benefits offerings is one notable example. Fortunately, you don’t have to deal with employee benefits administration alone.

    Group Management Services works with small business owners to help them offer and manage quality benefits packages and save valuable time. As a Professional Employer Organization (PEO), our greater buying power allows you to offer competitively-priced group health plans and ancillary options on a mass level, even for at-risk employers or small groups.

    Partnering with GMS also means that you have a dedicated resource that’s here to help. We’re always looking for ways to improve your offerings, which is why we recently switched our vision provider to VSP to ensure that you and your employees have the perfect ancillary benefits for your business. In addition to our new vision provider, we continue to offer additional benefits to our clients, including Metlife Auto & Home coverage. We also have a team of experts on hand to answer your questions and guide your through any HR hurdles you may face in the future.

    Ready to make your business more competitive? Contact GMS today about how we can support you and your employees with ancillary insurance and other HR services. Already a GMS client? Contact your account manager to learn more about VSP and our vision plans.

  • As a small business owner, you’re in charge of making many critical decisions that impact your employees. Determining which benefits and employee perks you offer is one choice that plays a direct role in attracting top talent and retaining key members of your company.

    These days, health insurance is a major sticking point for new and current workers. The Society for Human Resource Management (SHRM) found that nearly half of employees ‘said health insurance was either the deciding factor or a positive influence in choosing their current job.’ That willingness to choose jobs based on health insurance makes a competitive benefits package even more important for a growing business.

    Of course, offering health insurance is also a notable expense for a small business trying to grow. Fortunately, the small business health care tax credit allows qualifying organizations to offset some of those costs and provide quality health insurance for their employees. Here’s what you need to know about this tax credit and whether it can help your business.

    Which Small Businesses Qualify for the Health Care Tax Credit

    While any business that offers health coverage would love to save money, the IRS does set some stipulations for which organizations will benefit from the tax credit. Your business will need to meet the following criteria to be eligible for the small business health care tax credit. 

    Your business must have fewer than 25 full-time equivalent employees

    Full-time equivalent (FTE) employees are typically counted as those who meet “an average of 30 hours of service per week for a calendar month or at least 130 hours of service in a month.” Any employee that performs services for your business would normally be counted, but the IRS requires employers to alter this calculation for the tax credit.

    Instead of counting 30 hours per week as one FTE employee, the health care tax reviews hours from an annual perspective. One FTE employee for the tax credits equals approximately 2,080 hours per year. Any part-time employees who combine to equal more than 2,080 hours would count as one FTE employee in these calculations.

    The IRS asks employers to not include the wages and hours worked by certain types of employees toward their 25 FTE employee limit. These individuals include:

    • The owner of a sole proprietorship
    • Any partner in a partnership
    • Shareholders of S Corporation owning more than 2%
    • Owners of more than 5% of the business or other businesses
    • Family members of the above
    • Seasonal employees who work 120 or fewer days per year

    Your business’s average wages must be lower than $56,000 per full-time equivalent

    In addition to meeting FTE requirements, your business must also meet certain wage thresholds. The IRS set the average annual wages at $50,000 back in 2014 and have adjusted the amount each year for inflation. As of the 2020 tax year, businesses must pay average wages of less than $56,000 to FTE employees to qualify for the tax credit. 

    Your business must offer a qualified health plan

    Any organization that wants to be eligible for the small business health care tax credit is required to offer a qualified health plan through a Small Business Health Options Program (SHOP) marketplace. There are also certain areas where a qualified health plan may not be available through SHOP. In those cases, an eligible business may still be able to claim the credit.

    Your business must pay health insurance premiums through a “qualified arrangement”

    According to the IRS, a qualified arrangement means that employers pay at least 50% of any premium costs for enrolled employee’s health insurance coverage. This arrangement only extends to costs incurred by those employees, meaning that any costs incurred by family or dependents do not affect the 50% threshold.

    How Much Can Organizations Receive from the Small Business Health Care Tax Credit?

    The exact amount of credit your organization receives depends on two main factors:

    • Whether your organization is tax-exempt or not
    • The size of your organization

    Eligible smaller businesses can receive a tax credit that covers up to 50% of the premiums paid for by the employers. Meanwhile, eligible employers who are tax-exempt can max out a 35% tax credit. This credit is available to both types of employers for two consecutive taxable years. Small business employers are able to carry that credit either forward or back as well.

    Of course, those numbers represent the maximum tax credit for your business. The exact amount your business can receive is based on a sliding scale where smaller employers will receive larger credits. According to the IRS, your maximum allowed credit will be reduced if you employ more than 10 FTE employees or have average wages of more than $25,000 (subject to change due to inflation).

    How to Claim the Tax Credit

    If your small business is eligible for the tax credit, you should fill out Form 8941 to calculate that credit. The IRS provides a detailed PDF with instructions on how to list your employees, their total hours, and how much you paid them. Meanwhile, tax-exempt organizations can file Form 990-T for their credits.

    How to Invest in the Right Benefits Package for Your Small Business

    Whether you qualify for a tax credit or not, it’s difficult to balance rising premiums and providing quality health care coverage that helps you attract and retain top talent. Fortunately, Professional Employer Organizations (PEO) like GMS make it possible for you to provide top-tier coverage at affordable prices.

    As a PEO, GMS is a natural fit for health insurance administration. We represent hundreds of businesses and can leverage our greater buying power to keep premiums down and give you access to quality plans at cost-effective prices. GMS also gives you and your employees access to experts who can help you stay on top of regulatory changes and educate group members about how to best use your plans.

    Let’s face it, benefits administration is confusing and time consuming. GMS helps you invest in quality, cost-effective coverage and allows you to reclaim your valuable time. Contact GMS today about group health insurance and ancillary benefits that makes sense for your small business.

  • I receive this question very often, especially at the beginning of each year. The IRS requires any company with a 401(k) plan to conduct annual compliance testing.

    The testing is conducted after the plan’s year-end. For most plans, this is 12/31.

    Why is plan nondiscrimination testing important?

    According to Transamerica Retirement Services, “Nondiscrimination testing mandates were added to the rules governing 401(k) plans to ensure that these plans are not designed to economically benefit only highly-paid personnel, but are fair for all employees. Not meeting these mandates, or failing to correct any failed year-end compliance test, could mean substantial penalties and possibly even disqualification of the plan’s tax-exempt status.”

    Simply put, 401(k) testing is required to make sure all employees benefit from the plan equally, regardless of their income level. When plans aren’t tested or fail the test, or when plan problems aren’t corrected, the company can be penalized.

    How does 401(k) testing work?

    401(k) testing involves examining the benefits received by all employees. For the purposes of these tests, employees are grouped into three categories:

    • Key Employee – anyone with at least a 5% ownership stake in the company (either last year and/or current year) or a direct relative (spouse, parent, or child) of someone with a 5% ownership stake.
    • Highly Compensated Employee (HCE) – for 2013 testing, anyone who has made $115,000 in 2012.
    • Non-Highly Compensated Employee (NHCE) – anyone that doesn’t fall into the other two categories.

    *Please note that all Key Employees are also considered Highly-Compensated Employees, but not all Highly-Compensated are considered Key Employees.

    What do the tests entail?

    These two tests are probably the ones that effect employers the most.

      1. Average Deferral Percentage Test (ADP)

    This test takes the average deferral rate of the HCE and compares it to the average deferral rate of the NHCE. The HCE can only contribute so much more than the NHCE.

    If you are a HCE and contribute more than the maximum allowed, then you could be subject to a refund or the company might have to make contributions into the NHCE accounts.

      1. Top-Heavy Test

    This test is a little different, in that it is always conducted for the upcoming year. The numbers used are from 12/31/12 to determine if you are Top-Heavy for 2013.

    Key Employees cannot control more than 60% of the entire plan’s assets. If they do, the company will have to make up to a maximum of a 3% non-elective contribution to any eligible employee of the company—even those who aren’t participating in the plan.

    How do I make sure I’m abiding by the rules?

    You need to make sure you are getting the proper guidance from your retirement provider. You also need to take ownership of your plan. Additional Plan Data forms are extremely important, because things change from year to year. It’s important to have the most up-to-date information so that your retirement provider can correctly conduct your testing.

    GMS, as a PEO company, is able to offer clients our 401(k) plan. We assist with administering the testing. Instead of just handing you the results, we will go over them and provide advice. Every company is in a different situation.

    Are you getting the right guidance on your 401(k) plan?

    “Numbers and Finance,” © 2011 Ken Teegardin, used under a Creative Commons Attribution-Share Alike 2.0 Generic License.

  • The Affordable Care Act is in full swing.

    “Now what?”

    I think I’ve heard that question from business owners a million times in the past few weeks.

    The Patient Protection and Affordable Care Act(PPACA or “Obamacare,” as it’s commonly known) means big changes for small businesses.

    Recently, Governor Kasich decided that, despite his initial opposition to the Affordable Care Act, he is going to accept the expansion of Medicaid allowed under that law. He reasons that this will extend insurance to 366,000 uninsured Ohioans while forcing the federal government to pick up the cost— rather than small businesses in Ohio picking up the tab.

    It’s true that this will open the spigot for $1.4 billion of federal funds to flood the Ohio program. But does anyone really believe this will not impact residents and businesses in our state?

    Potential Benefits

    A recent article in Crain’s Cleveland Business — “Expansion of Medicaid could help employers” (subscriber’s ink) — reports that the Greater Cleveland Partnership has thrown its considerable support behind this. They believe that this will allow small businesses to shift low-wage workers to Medicaid, effectively lowering the cost of their healthcare plans. It was this very idea that made government-backed health insurance appealing to many small business owners.

    The benefits of the Medicaid provision in the Affordable Care Act are:

    • The federal government will pick up the full cost of this expansion for the first three years, followed by 95% of the cost and eventually 90%.
    • It will allow low-income employees to opt out of an employer-sponsored plan to go to a “no-cost” (to them) Medicaid plan.
    • Employers would then be off the hook for any kind of penalties associated with a lack of insurance coverage.

    Governor Kasich has stated that if the government doesn’t follow through on their promise, he will back out of the plan.

    Questions Remain

    In that same article, despite its initial support of the expansion, the Ohio Chamber of Commerce says it still has “serious concerns” about the long-term financial stability of the program.

    Is anyone else confused?

    Everyone seems to be hedging their bets, and at this point there are more questions than answers.

    It boils down to this: eight months after the Supreme Court upheld the healthcare overhaul law, small businesses in Ohio and across the country are no less certain about how all of this impacts them and their companies.

    This uncertainty, coupled with a challenging economy, means small business owners still have to assess their options in an uncertain market. They may not have the luxury of having a Benefits Department to advise on what’s right for them. That’s why more and more small businesses are turning to outside help for their employee benefits administration. More companies are relying on PEO companies to navigate these murky waters.

    What do you think about the Medicaid expansion? Tell us about it below!

    “Providence Seaside Hospital in Seaside, Oregon.” ©2010 M.O. Stevens, used under a GNU Free Documentation license.

  • Do any of these sound familiar?

    • Losing good employees to competitors.
    • A cranky work environment.
    • Excessive workplace injuries.
    • Out-of-control healthcare costs.
    • Ridiculously high unemployment insurance costs.

    If you’ve been dealing with any of these issues, no doubt you’ve come to the conclusion that HR is more than just a luxury enjoyed at big corporations. HR is a necessity for small and medium-sized businesses, too.

    It’s possible that you have HR problems. What are you going to do?

    HR Outsourcing

    You’ve heard about HR outsourcing, but maybe you don’t know what it entails or how to learn more about it. How can you tell if it is right for your company?

    You’ve heard about Professional Employer Organizations (PEO). But maybe it sounds a little shaky since you don’t know of anyone who’s using a PEO. How popular are PEOs?

    You might be surprised.

    The HR outsourcing industry has grown from $61 billion in 2002 to $103 billion in 2007 and is projected to grow to $162 billion in 2015. The largest chunk of that is the PEO industry.

    Professional Employer Organizations (PEO)

    PEOs work with small businesses to help reduce time and cost when it comes to the things that an HR department would do at a large company. If you walked into a large corporation with thousands of employees and asked to see their HR department, what do you think you would see? The department would include a payroll department, a benefits department, a risk management department and actual HR manager or department. You might even find a wellness department to work hand-in-hand with the benefits department.

    These huge companies have tons of money to throw at problems and lots of high-priced attorneys to get them out of trouble. Yet they still keep all of these departments active. They know how important HR can be.

    Big corporations realize they need HR departments. It’s even more crucial that small businesses understand that they should have access to these essential HR services.

    Specializing in Small Business HR

    Not all small businesses have the means or the resources to keep all of these HR departments in-house, and that’s when they should begin looking at outsourcing their HR.

    A small business is already probably outsourcing their payroll, their benefits and their Worker’s Comp administration to different companies. All of those departments need to be able to share information with each other. If you can have one vendor do all of that for you, allowing you to focus on growing your business, wouldn’t you? What if you could do that while saving money as well? What if in addition to saving money, you could also offload a lot of your tax and employee liability in the process? Can you see why this industry is growing?

    What about compliancy issues? In the last five years, have you seen an increase or a decrease in the amount of regulations imposed on your business? What about the Affordable Care Act? Do you need to be compliant? If not now, will you someday? What does that mean to you? Do you know who to turn to find out?

    There are tons of HR questions that small businesses have, and PEOs—like GMS—have the answers. Ask us anything.

    ***

    “Footbridge to Canary Wharf,” © 2008 Stephen McKay, used under Creative Commons Attribution-Share Alike 2.0 Generic License.

  • Your PTO Policy

    When an employee calls to say they woke up feeling like death warmed over, do you have to tell them to drag their butt to work because your company doesn’t have a Sick Time Policy? Or when you receive vacation requests, do you have to think twice about how to track it because your Time Off Policy is so complex? Unfortunately, many would answer yes to these questions because of inefficient Paid Time Off (PTO) Policies.

     

    [more]

    Keep It Simple

    As a benefit that many companies offer to their employees, PTO Policies are constantly evolving to accommodate the changes in the working world. However, many employers fall into the trap of overly complicated policies that are not only difficult for employees to understand, but difficult to track. Keeping a simple policy that will make employees happy and maintain effective workplace attendance is easier than you might think. 

    An accrual table based upon tenure is a simple way to track the amount of time an employee may take off. It fosters employee loyalty as they work to climb the ladder to achieve more vacation time, while the accrual method regulates how frequently time off can be taken by not awarding PTO all at once.

    Charmaine Hollaway wrote a recent article addressing increased vacation time requests around the holidays. An organization can effectively manage such requests by creating a time off policy that incorporates the following:

    • Place a cap on the number of days that employees may request during a vacation leave.
    • Regulate the number of employees from within a department that may be out at any given time.
    • Mandate how much notice employees must provide prior to taking vacation.

    Simultaneously tracking a Vacation and Sick policy for employees can be further simplified by automating the accruals through your payroll service. Working with a professional employer organization like GMS makes this possible. Our HR Account Managers can help you design a policy that is tailored to your company’s needs and we can automate the tracking to take that time-consuming task off of your plate. So the next time you look to update your PTO Policy, consider simplifying the process.

    Quote Source: Midwest HR

    Image Source: Call Center Comics