With a new year come a lot of new changes and updates to payroll requirements. 2020 is quickly approaching, so - as in the last few years - 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, 2020 will increase from the current $132,900 to $137,700. 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 0.9% that 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 current Oregon SUTA base is $40,600. This will be increased beginning in 2020 to $42,100. The Washington State base for 2019 is currently $49,800. This will be increased beginning in 2020 to $52,700. 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, while the unemployment rate is specific to each individual company. You should receive your new unemployment rate in December.
Federal Unemployment Tax Act (FUTA)
The current FUTA rate is 6.0% of the first $7,000 of employee wages. Employers generally get a credit of up to 5.4% (state tax credit) if unemployment taxes are paid in full and on time. The FUTA rate after the credit is 0.6%.
Oregon Local Taxes
Beginning in calendar year 2020, the Lane Transit District tax will increase from the current .0074 to .0075. The Wilsonville transit tax will remain unchanged at .005. The current TriMet transit tax rate is .007637, and it will increase to 0.007737.
Washington Paid Family and Medical Leave
Paid Family and Medical Leave is an insurance program funded through premiums paid by employers and employees which began 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. Premiums can be adjusted after 2020. For additional information you can visit the Washington Paid Family & Medical Leave website.
Oregon Workers’ Benefit Fund
The current 2.4 cents per hour worked assessment will be reduced in 2020 to 2.2 cents per hour worked. Employers must continue to pay at least half of the amount (1.1 cents) and deduct no more than 1.1 cents from employees' wages. Payments must continue to be made directly to the state with other state payroll taxes. 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 $19,000 to $19,500 in 2020. Employees age 50 and over will have the 'catch-up' contribution limit increased to $6,500.
Garnishment Exemptions
This year, SB 519 was signed into law, which Increases the minimum wage exemption for purposes of wage garnishment effective January 1, 2020. For any period of one week or less, the minimum wage exemption is raised from $218 to $254; for any two-week period, it is raised from $435 to $509; for any half-month period, it is raised from $468 to $545; for any one-month period, it is raised from $936 to $1,090.
Flexible Spending Account (FSA) / Parking and Transit Limits
Employee pre-tax deductions for health reimbursement accounts will increase to $2,750 for plan years on or after January 1, 2020. This is an increase of $50 over 2019. Parking and transit limits for 2020 each increase to $270 per month (a $5 increase). The dependent care reimbursement remains unchanged at $5,000 ($2,500 if married and filing separate taxes). 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
For 2020, the IRS increased pre-tax deductions for HSAs to $3,550 for individual coverage and $7,100 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
Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premiums rates for 2020 are expected to decrease for the seventh–straight year by 8.4%. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. The pure premiums are combined with an assessment rate, which is expected to increase from 7.8% to 8.4% of premiums paid. The assessment rate funds the state costs of running Workers’ Compensation programs.
OregonSaves
OregonSaves was rolled out in October 2017 and is a mandatory state retirement program. The program is applicable to all size employers. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. This year, Governor Kate Brown signed SB 164 into law, which goes into effect January 1, 2020. This law states that employers not complying with OregonSaves will be subject to penalties of up to $100 per eligible employee up to $5,000 per year. Employees make contributions to personal IRAs through payroll deductions that start at 5% of gross pay and increase 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.
ACA
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. Form 1095-Cs need to be provided to employees by January 31, 2020. Forms 1094-C and 1095-C are required to be filed with the IRS by February 28, 2020 if completing paper filing and by March 31, 2020 for electronic filing (required for employers with more than 250 1095-Cs).