puzzling payroll predicaments laura kushner human resources league of minnesota cities

PuzzlingPayroll Predicaments

Laura KushnerHuman Resources

League of Minnesota Cities

AgendaElection JudgesFringe Benefits Independent Contractor

UpdateMinnesota Minimum Wage

Law Fair Labor Standards ActExpansion of sick leave (if

time)

Election Judges

Fringe Benefits

Benefits provided to employees are taxable, unless there is a specific exemption in the tax

code.

Accountable Plan

Business connection to the expenditure

Reasonable accounting for expense Excess reimbursements or

advances repaid to city

Accountable Plan

Example: City provides city manager with a

monthly car allowance of $500. The city manager does not need to substantiate the business connection and does not need to turn in receipts or track miles.

Taxable or not

taxable?

Fringe Benefits

Taxable unless a specific exclusion applies; or

Unless “de minimis”

“De Minimis” -- amount is so small that accounting for it would be administratively difficult

IRS Publication 15-B:

www.irs.gov

Fringe BenefitsExamples of fringe benefits excluded

from income: Accident & health benefits

Major medical, HRA’s, VEBA, Cafeteria Plans

Achievement awards (limits) Dependent care (limits) Health Savings Accounts (limits)

Athletic & Fitness MembershipsExample:City has a fitness facility in community center. Employees are provided free memberships.

Taxable or not taxable?

Taxable or not taxable?

Athletic & Fitness Memberships

To be excluded

from income: Substantially

all of the use of the facility is by employees, spouses, and dependents

No public use / access

Gift Cards

Example:City offers gift cards in varying amounts as incentives and prizes for participation in its wellness program.

Taxable or

not taxable?

Gift Cards Treated same as cash Any amount is taxable income

No “de minimis” for gift cards

$5.00 gift card to Caribou = $5.00 of taxable income to employee

Independent Contractors New guidance issued by DOL Strong area for compliance/audits,

etc. “Economic realities” test

Is the work integral part of the city? Does worker’s skill affect profit/loss? How does worker’s investment compare

to employer’s investment? Work require special skill and initiative? Relationship permanent vs. indefinite? Nature and degree of employer control?

Independent Contractor?City Hall Custodian

City Attorney

MN Minimum Wage Law

Small Employer Total budget

amount under $500,000

$7.25/hour (8/1/15)

$7.75/hour (8/1/16)

Indexed by economic indicators after that

Large Employer Total budget

amount over $500,000

$9.00/hour (8/1/15)

$9.50/hour (8/1/16)

Indexed by economic indicators after that

Employees under 18 $7.25 – 8/1/2015 $7.75 -- 8/1/2016

YOUTH & MN Minimum Wage LawFirst 90 days of employment

– IF UNDER AGE 20

$7.25/hour (8/1/2015)

$7.75/hour (8/1/2016)

Indexed by economic indicators after that

ONE MORE THING ….Definition of Employee does NOT include:…

(1) elected official or commission member

(2) person ineligible for membership in PERA because:• Less than $5,100/year

($3,800 schools)• < 23 yrs, full-time student

(3) under 18, <20 hrs., recreation program employee

FAIR LABOR STANDARDS ACT – IT’S COMING ….

Expansion of Sick Leave Benefits

#1

#2

#4

#5

#3

#6

Resources Internal Revenue Service

Lori.A.Stieber@irs.gov

Public Employees Retirement Association

Your City Auditor League of Minnesota Cities

HRBenefits@lmc.org (E-MAIL IS OFTEN FASTEST!)

651-281-1200 800-925-1122

Ask for HR DEPT