With a new year come new changes and updates to payroll requirements. 2019 is quickly approaching, so - like last year - we 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 beginning January 1, 2019 will increase from the current $128,400 to $132,900. 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 0.9% individuals with earned income of $200,000 and more ($250,000 and more for married couples filing jointly) pay.
State Unemployment Tax Act (SUTA)
The Washington State SUTA base for 2018 is currently $47,300. This will be increased beginning in 2019 to $49,800. The current Oregon base is $39,300, and the 2019 amount will be adjusted to $40,600. 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 Paid Family & Medical Leave
Paid Family and Medical Leave is an insurance program funded through premiums paid by employers and employees by paycheck withholding beginning January 1, 2019. Employees will be able to start applying for these benefits January 1, 2020. The total premium amount for 2019 is 0.4% shared by the employer (37%) and the employee (63%). An employer can choose to pay the employee portion of the premium. Employers with fewer than 50 employees are not required to pay the employer portion of the premium but are still required to collect and remit the employee portion. The program is being administered by the Employment Security Department.
Oregon Workers’ Benefit Fund
The current 2.8 cents per hour assessment will be decreased to 2.4 cents per hour worked in 2019. 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 $18,500 to $19,000 in 2019. 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 $2,700 for plan years on or after January 1, 2019. This is an increase of $50 over 2018. Parking and transit limits for 2019 each increase to $265 per month (a $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 $3,500 for individual coverage (a $50 increase from 2018) and $7,000 for family coverage (a $100 increase from 2018). 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 2019 are expected to decrease once again by an average of 9.7% from 2018. The pure premium is the portion employers pay to cover claims and benefits for lost wages. This is the 6th year in a row these rates will reduce. The pure premiums are combined with an assessment rate which is expected to increase from 7.4% to 7.8% of premiums paid. The assessment rate funds the state costs of running workers’ compensation programs. The decrease in pure premium is effective January 1, 2019, but changes will take effect when the employer’s policy renews in 2019. A Workers’ Compensation Cost Summary with additional information is available for your reference.
The 2019 W-4 form has not yet been released but is expected to be very similar to the 2018 form currently in use. Following feedback from the payroll and tax communities, the IRS has postponed the release of significant form changes (that were expected due to the federal tax law updates) until the 2020 form release. The IRS continues to strongly encourage taxpayers to review their withholdings by using the Withholding Calculator on the IRS webpage.
Oregon Equal Pay Law
On June 1, 2017, Oregon Governor Kate Brown signed House Bill 2005 into law, which goes into effect January 1, 2019. This law prohibits employers from paying employees different rates of pay for performing comparable work. Employers can only avoid liability by showing that the differences in pay are due to a bona fide factor (including: seniority, workplace location, merit, production-related systems, travel needs, education, and experience). Employers will also not be permitted to inquire about a job applicant’s current or past compensation until after extending a job offer and cannot make compensation decisions on the basis of past compensation.
OregonSaves was rolled out in October 2017 to employers with 100 or more employees. The program is now available to all size employers (currently required for employers with 49+ employees) and will be required for employers with as few as 5 employees by the end of 2019. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. Employees make contributions to personal IRAs through payroll deduction starting at 5% of gross pay and increases 1% each year of participation (employees can choose additional amounts). Employers that offer an employer-sponsored plan must certify they do, and this certification can be done online in just minutes.
Taxpayers must continue to report coverage, qualify for an exemption, or pay the individual mandate for 2017 and 2018 tax years. While the individual mandate has been repealed starting in 2019, the Applicable Large Employer (ALE) mandate stating employers with 50+ employees must provide coverage and reporting is still in effect.