With a new year come new changes and updates to payroll requirements. 2018 is quickly approaching, so we have compiled the following list of items that may initiate some payroll changes in your organization. You might start thinking about these and take action sooner than later.
FICA Tax Rate Increase
The maximum amount of earnings subject to the Social Security payroll tax in 2018 will be increasing $1,500 from the current $127,200 to $128,700. The 7.65% employee tax rate remains unchanged and is the combined rate for Social Security (6.2%) and Medicare (1.45%). These rates do not include the additional .09% for individuals with earned income of $200,000 and more ($250,000 and more for married couples filing jointly).
State Unemployment Tax Act (SUTA)
The Washington State SUTA base for 2017 is currently $45,000. This will be increased beginning in 2018 to $47,300. The current Oregon base is $38,400, and the 2018 amount has not yet been released. The base rate is the maximum amount of wages per employee for which unemployment tax is applicable each year and is the same for all employees within a state.
Washington Mandatory Sick Leave
Effective January 1, 2018, employers with employees in Washington must provide paid sick leave as follows:
- Paid sick leave accrues at a rate of 1 hour of leave for each 40 hours worked.
- Unused paid sick leave of 40 hours or less must be carried over to the following year.
- Paid sick leave may be used for an employee’s own illness or injury or to care for a family member.
- Employers may require reasonable notice.
- Employers may require verification of permissive use of leave for absences lasting more than three days.
Oregon Mandatory Sick Time
Effective January 1, 2016, Oregon implemented a Mandatory Sick Time policy. Employers with 10 or more employees (at least 6 for employers located in Portland) must provide 40 hours of paid leave per year. Employers with less than 10 employees (also less than 6 for employers located in Portland) must provide 40 hours of unpaid sick leave. Sick leave accrues at a rate of 1 hour for every 30 hours worked (1 1/3 hours for every 40 hours worked). Employees may carry over up to 40 hours of unused sick time, and employers can choose to limit employees to accruing no more than 80 hours or using no more than 40 per year.
Oregon Workers’ Benefit Fund
The current 2.8 cents per hour assessment will remain unchanged in 2018. Employers must continue to pay at least half of the amount and deduct no more than half from employees' wages. Payments must continue to be made each quarter using Forms OQ and OTC. Additional detailed information can be found on the Oregon.gov webpage.
401(k) Limit Increase
The contribution limit for employees who participate in 401(k) and 403(b) plans will increase from $18,000 to $18,500 in 2018. Employees age 50 and over have the same 'catch-up' contribution limit of $6,000.
Flexible Spending Account (FSA) / Parking and Transit Limits
Pre-tax deductions for health reimbursement accounts will increase to $2,650 for plan years on or after January 1, 2018. This is an increase of $50 over 2017. Parking and transit limits for 2018 each increase to $260 per month ($5 increase). The dependent care reimbursement remains unchanged at $5,000. Remember that employees can only change elections during open enrollment and must have a qualifying event to make any changes during the rest of the plan year.
Health Savings Account (HSA) Contributions
The IRS increased pre-tax deductions for HSAs to $3,450 for individual coverage and $6,900 for family coverage. This is for members that have high deductible medical coverage that qualifies to be paired with a Health Savings Accounts.
Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premiums rates for 2018 are expected to decrease by 14% in 2018. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. This is the 5th year in a row these rates will have been reduced. The pure premiums are combined with an assessment rate which is expected to increase from 6.8% to 7.4% of premiums paid. The assessment rate funds the state costs of running workers’ compensation programs. The decrease in pure premium is effective January 1, 2018, but changes will take effect when the employer’s policy renews in 2018.
Earned Income Tax Credit (EITC) Notice Requirement
While the EITC Notice does not affect payroll, it is a new requirement which several states have adopted - including Oregon with the passage of Senate Bill 398. Employers are required to provide written notice to employees about the Earned Income Tax Credit with the annual federal W-2. The notice provides people with low to moderate incomes eligibility information for the EITC. Taxpayers eligible for the EITC may claim an Oregon credit equal to 8% of the federal credit. The notice must include the state and federal EITC websites where employees can find additional information.