Employer News | Quarterly Newsletter | Fall 2021

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Fall | Volume # 170

Social Security Announces 5.9% Benefit Increase for 2022

On October 13, 2021, the Social Security Administration announced that Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase by 5.9% in 2022. SSI beneficiaries can expect increased payments starting December 30, 2021, and Social Security beneficiaries can expect benefits payable in January 2022.

Please note—some people receive both Social Security and SSI benefits.

The Social Security Act ties the annual cost-of-living-allowance (COLA) to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics. 

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De Minimis Fringe Benefits—Is that Holiday Turkey Taxable?

In general, a de minimis is a benefit that, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items that are not specifically excluded under other sections of the Code. These include such items as:

  • Controlled, occasional employee use of a photocopier
  • Occasional snacks, coffee, doughnuts, etc.
  • Occasional tickets for entertainment events
  • Holiday gifts
  • Occasional meal money or transportation expense for working overtime
  • Group-term life insurance for employee spouse or dependent with face value not more than $2,000 
  • Flowers, fruit, books, etc., provided under special circumstances
  • Personal use of a cell phone provided by an employer primarily for business purposes

In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation.

Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount. The IRS has ruled previously in a particular case that items with a value exceeding $100 could not be considered de minimis, even under unusual circumstances.

Cash Benefits

Cash is generally intended as a wage and usually provides no administrative burden to account for. Cash therefore cannot be a de minimis fringe benefit. An exception is provided for occasional meal or transportation money to enable an employee to work overtime. The benefit must be provided so that employees can work an unusual, extended schedule. The benefit is not excludable for any regularly scheduled hours, even if they include overtime. The employee must actually work overtime. Meal money calculated on the basis of the number of hours worked is not de minimis and is taxable wages.

Gift Certificates

Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.

A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.

Achievement Awards

Special rules apply to allow exclusion from employee wages of certain employee achievement awards of tangible personal property given for the length of service or safety.

These awards:

  • Cannot be disguised wages
  • Must be awarded as part of a meaningful presentation
  • Cannot be cash, cash equivalent, vacation, meals, lodging, theater or sports tickets, or securities. 

Source: Internal Revenue Service.

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Give Tax Withholding a Fresh Look as 2021 Year-End Nears

Life brings constant changes to individual financial situations. Events like marriage, divorce, a new child, or home purchase can all be reasons to adjust withholding. The last quarter of 2021 is a good time to check your withholding according to the Internal Revenue Service.

The convenient Tax Withholding Estimator, also available in Spanish, helps taxpayers determine if they have too much withheld and how to make adjustments to get more cash into their pocket now. It can also help taxpayers see if they should withhold more or make an estimated tax payment to avoid a tax bill when they file their tax return next year.

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Entering Termination Dates

When an employee terminates their employment, remember to submit termination dates for each plan in which the employee is enrolled. Each plan is independent of one another, and a termination date submitted for one plan will not carry over to another plan.

For example, if an employee is enrolled in both PERS and SBS, a termination date must be submitted separately for the member with both the PERS and SBS payrolls.

Employees must have a termination date before they can refund their retirement accounts. It is not uncommon for a member to attempt refunding their account, only to encounter a delay due to not having a termination date on file. Timely submission of termination dates will allow employees to refund their accounts timely and reduce the number of inquiries made to you, the employer, to check the status of a member.

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Hiring A New Employee?

It is easy to transpose numbers when entering data. Make sure to verify all personnel data before submitting.

Importance of Entering Correct Employee Information

Entering the correct Social Security number (SSN) and legal name is critical!

The Division relies on employers to properly report names and social security numbers. A member’s account is driven by the Social Security Number (SSN). Each SSN submitted creates a separate account for the member. If two accounts are created for an individual member, it requires an SSN merge to correct member contributions.

Although not required for verifying an employee’s identification, it is highly recommended that employers maintain a copy of an employee’s Social Security card. An employee's name and SSN must match against the Administration's database. This is especially relevant for employees who have an account with Empower Retirement, as Empower will request a copy of a member’s social security card if there are discrepancies in an employees’ Taxpayer Identification Number (TIN). Empower will check an employee’s TIN, furnished by the employer, against the name/TIN combination contained in the Internal Revenue Service (IRS) database. Empower will place a fraud alert on a member’s account if an SSN discrepancy is discovered, and the member will not be able to refund their account until an SSN verification is provided to Empower.

If you have any questions regarding correcting a name and/or SSN, please reach out to your payroll contact.

Make Sure Employees Are Hired In The Correct Plan

It is critical for employers to verify that a new employee is enrolled in the correct plan when they are hired., If they are hired into the wrong plan, an SSN merge may be required. Normally, all employees hired after June 30, 2006, are to be enrolled in the Defined Contribution Plan (DC) Plan. However, if an employee was previously a Defined Benefit (DB) member with a previous employer or the same employer and they have not refunded their account, they are eligible to be re-enrolled in the DB plan upon hire. Contributions will have to be backed out for members enrolled in the wrong plan.

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Payroll Submissions—Remember To Send In Signed Summary Sheets

For payrolls that are submitted using automated clearing house (ACH), signed payroll summary sheets and ACH memos (if applicable) need to be sent to doa.drb.employerpayroll@alaska.gov at the time payment is submitted.

If remitting payment by check, please make sure to include the signed summary sheet with your check. This will help identify which payroll the check is for and will ensure contributions are posted without delay.

Electronic Payment Is Preferred

To ensure timely and uninterrupted payroll processing, we encourage you to submit payments electronically rather than by check. Please see two payment options below:

  1. eReporting ACH with Bank Account Activation (preferred method)
    • Go to eReporting
    • Open the Banking Tab
    • Set-up electronic fund transfer (EFT)
    • Bank account will be PENDING until your financial institution finalizes approval
    • Once ACTIVE, you can submit payment with ACH
    • Payment is submitted with payroll, and only the Signed Summary report is needed for processing
  2. eReporting Other ACH with no Bank Account Activation
    • No activation is required in eReporting
    • Submit payment with other ACH
    • A Signed Summary along with an ACH memo is required to be sent in together for processing

If you are interested in setting up an ACH payment, please reach out to your payroll contact for more information.

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New Hires: Empower Beneficiary Designation

Effective February 1, 2019, Empower Retirement moved to electronic beneficiary forms for all plans they administer, including the PERS and TRS, DCR, SBS, and DCP plans. New hires should be instructed to wait until their account is established with Empower so the beneficiary designation can be updated electronically. Accounts are established once the first contribution is posted to the new employee’s Empower account. The new hire will receive a welcome postcard from Empower, which will be the signal that they can log in to their account, familiarize themselves with the Empower website, and update their beneficiary designations.

If an employee does not have computer access, refer them to the Empower customer service toll-free number at (800) 232-0859, once the new employee has received their welcome postcard. Empower representatives are available between 5 a.m. and 5:30 p.m. Alaska Time, Monday through Friday.

Current employees with established accounts should be advised to update their beneficiary designations in the same manner. Please discontinue faxing paper beneficiary forms as these will be rejected.

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Oops! I Submitted DCR Member Contributions Incorrectly

There may be times when an employer needs to back out ineligible contributions that have been submitted to the Division of Retirement and Benefits. Some reasons may include:

  • The member enrolled in the Defined Contribution Retirement plan (DCR) when eligible for the Defined Benefit Plan (DB)
  • An incorrect Social Security number (SSN) was submitted, which created a separate account for the member
  • Ineligible contributions (concurrent service, ineligible wages) When this happens, be aware of the following:

Employer Responsibility

Per statute, if a DCR member’s contributions must be backed out from Empower Retirement for PERS, TRS, SBS, or DCP, the employer is responsible for all Empower fees and market losses associated with the ineligible contributions. If the member does not have enough funds in his/her account to cover the backed-out contributions, the shortage will be added to the employer’s over/short account as an amount owed by the employer related to the full backout.

Relevant Statutes:

PERS Sec. 39.35.770. Transmittal of Contributions; Claims Against Funds of an Employer, and (c) Employers are responsible for administrative fees, investment fees, and investment losses charged to accounts established under AS 39.35.730 resulting from contribution adjustments due to employers enrolling members in the plan before the members are eligible for membership. Contributions made by employees shall be returned to the employer by reducing future employee contributions due. Contributions, net of fees, and investment losses, made by employers shall be used to reduce future employer contributions due.

TRS Sec. 14.25.370. Transmittal of Contributions; Claims Against Funds of an Employer (c) An employer is responsible for administrative fees, investment fees, and investment losses charged to accounts established under AS 14.25.340 resulting from contribution adjustments because the employer enrolled a member in the plan before the member was eligible for membership. Contributions made by an employee shall be returned to the employer by reducing future employee contributions due. Contributions, net of fees, and investment losses, made by an employer shall be used to reduce future employer contributions due.

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Deferred Compensation Amendments

The Division of Retirement and Benefits is happy to announce the implementation of several new in-service distributions in our 457b Deferred Compensation Plan (DCP). The Setting Every Community Up for Retirement Enhance (SECURE) Act modifies the distribution rules that apply to governmental 457b DCP.

Under the SECURE Act, our governmental 457(b) plan now allows in-service distributions as early as age 59-½. This allows participants who remain employed after 59-½ the option of taking a distribution at any time. This is a major change from the former age 70-½.

The plan may now issue one or more Birth and Adoption distributions to participants not to exceed $5,000 per child. The distribution must occur after the birth and adoption.

In addition, the plan now permits a one-time-only, in-service, small -account-balance distribution that applies only to accounts valued at $5,000 or less and to which no contributions were made for the preceding two years.

Contact Empower Retirement contact center at 800-232-0859 if you have any questions or want to apply for one of these new distributions from the DCP.

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