2025 Dollar Limits Have Been Announced


Each year, dollar limits for various employee benefit and tax-related items are updated based on the rate of inflation. Here’s an overview of key items updated for 2025 announced by the IRS within the last couple of weeks:


The 401(k) salary deferral limit will be $23,500 (up from $23,000), with a $7,500 catch-up contribution for employees who attain age 50 by the end of the year. This means that 401(k) plan participants 50 and over can contribute a total of $31,000 in 2025.


  • New beginning in 2025 – a higher catch-up contribution limit of $11,250 applies for 401(k) plan participants ages 60 through 63.


The amount individuals can contribute to a SIMPLE retirement account has increased to $16,500 (up from $16,000), with a catch-up contribution of $3,500 for SIMPLE plan participants ages 50 and over.


  • New beginning in 2025 – a higher catch-up contribution limit of $5,250 applies for SIMPLE plan participants ages 60 through 63.


The limit on annual contributions to IRAs remains at $7,000, with a catch-up contribution for individuals aged 50 and over of $1,000 for a total annual contribution limit of $8,000 for those individuals.


The contribution limit for flexible spending accounts (FSAs) that provide reimbursement for medical expenses increases to $3,300 for 2025, up from $3,200 in 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.


The 2025 contribution limit for dependent care flexible spending accounts remains at $5,000.


The annual limit on health savings account (HSA) contributions for employees with self-only coverage will be $4,300. For family coverage, the contribution limit will be $8,550. A health savings account is available to individuals with coverage under a high deductible health plan (HDHP) with a deductible of at least $1,650 for self-only coverage or $3,300 for family coverage.


The Social Security Taxable Wage Base for 2025 will be $176,100, up from $168,600 in 2024. The Social Security tax rate remains 6.2%. There is no limit to the wages subject to Medicare tax, with all wages subject to the 1.45% tax for a combined FICA tax rate of 7.65%. There is an additional 0.9% Medicare tax assessed for employees once their wages exceed $200,000 in a year.

Overtime Rule Overturned Nationwide


As you may remember, effective July 1, 2024, the Biden administration put into place a new salary threshold of $43,888 per year that determines whether employees are subject to overtime pay. This threshold was set to increase to $58,656 per year on January 1, 2025.

 

In the past, updates to the exempt employee salary threshold have met with substantial opposition from the business community, and this time was no exception. Shortly after the new rule was announced, a federal judge in Texas temporarily blocked the new rule from taking effect for Texas state employees, leaving it in effect for all other employers.

 

Now – as of November 15, 2024 – the US District Court in Texas has permanently blocked the new overtime rule from going into effect nationwide. The Court indicated the DOL “exceeded its statutory jurisdiction” in making changes to the minimum salary level. The automatic increases in the salary threshold, which were originally set to increase every three years, have also been eliminated.

 

This means that the previous salary threshold of $35,568 per year or $684 per week (established in 2019), will go back into effect immediately.

 

The minimum salary threshold is only one component for complying with the overtime exemption. In addition to being paid a fixed and predetermined salary amount above a certain threshold, an employee’s job duties must also meet the “white collar” duties test for administrative, professional, outside sales, and computer employees.

 

As of this writing, the Department of Labor’s website has not yet been updated for this latest information and has not yet made any comments. While the Labor Department could seek a review of the overturn of the overtime threshold, it’s uncertain whether the incoming Trump administration will do so.

 

Employers should be aware that each state and locality establishes its own exempt salary thresholds, some of which exceed the federal threshold. Since employers are responsible for complying with both state and federal labor laws and minimum salary requirements, the overturn of this ruling may not affect employers in every state. States with higher exempt salary thresholds include (but are not limited to) AlaskaCaliforniaColoradoNew York, and Washington

FUTA Credit Reduction 2024

 

Normally, an employer’s FUTA rate of 6.0% can be reduced by up to 5.4% (for a net FUTA rate of 0.6%) through credits the employer can take based on making full and timely SUTA payments. From time to time, states with high unemployment rates borrow from the federal government to keep their unemployment coffers afloat. If a state does not pay back the federal loan by November 10 of the following year, employers in that “credit reduction” state will pay an additional 0.3% for each year for which the state has an outstanding loan balance on January 1.

 

California and New York will continue to be credit reduction states at the rate of 0.9% with a total rate of 1.5%, which includes the 0.6% normally assessed. Connecticut was formerly a credit reduction state but paid off its outstanding balance before November 10, 2024 so is no longer subject to credit reduction.

Payroll Insights

Ann Hobart, Mize Payroll Manager


Cut Costs & Risks: Active Without Earnings Cleanup


There are numerous reasons why inactive employees on your HR/payroll systems can increase your liability, but here are a few very concrete ways these employees are costing you money and risk.


Read More Here

Mize Connect

Mize Connect pilot phase is completed and we are rolling out more broadly in 4Q and in 2025. The new app provides access to pay statements, W-2 and 1095 forms, same day pay access, benefits and perks, and more. 

Mize Connect was recently updated to include electronic consent for W-2 and 1095 forms! Electronic consent means employee forms will be available through the app sooner than waiting for a printed copy.

 

Contact us if you are interested in transitioning!

Secure Act 2.0

Notify your payroll processor if you have made changes to your retirement plan that require implementation of automatic enrollment, increased catch-up contributions for age 60-63, and employer Roth After Tax match option.  These provisions are part of Secure Act 2.0. 

Questions? Reach out to Ann Hobart at ahobart@mizecpas.com.

State By State News

2025 Wage Changes

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California


The State Disability Insurance rate is increasing to 1.2% in 2025.

Colorado


Holiday incentive pay must be included in the calculation of an employee’s regular rate of pay, as it is considered part of all compensation paid to an employee under state rules. Holiday incentive pay is also considered a shift differential.

Connecticut


Effective January 1, 2025, the state’s minimum wage will increase to $16.35 per hour (up from $15.69 per hour). The minimum cash wage for tipped hotel and restaurant workers will remain $6.38 per hour. The tip credit for tipped hotel and restaurant workers will increase to $9.97 per hour from $9.31 per hour. 

Maine


The state’s withholding tables have been updated for 2025. The supplemental wage tax rate remains 5%.


Voters in Portland, Maine approved a ballot measure that would enforce the city’s Emergency Wage provisions as long as the city, not the state, declares a state of emergency. Under the provisions, workers within the city will be entitled to 1.5 times their usual hourly rate in hazard pay.

Massachusetts


The 2025 employer contribution rate for paid family and medical leave remains at 0.42% and the employee contribution rate remains at 0.46%. The taxable wage base will be $176,100. The maximum employer contribution will be $739.62 with a maximum contribution of $810.06 for employees. 

Michigan


Expanded Paid Sick Leave is coming effective February 21, 2025, due to the implementation of the Earned Sick Time Act (ESTA) that will replace the current Paid Medical Leave Act (PMLA). This new law applies to all employers, regardless of size, requiring them to provide up to 72 hours of sick leave annually. The key changes include faster accrual rates, expanded definitions of family members, and increased enforcement provisions.

Employers must allow carryover of unused sick time and cannot cap accruals for most businesses. This change is due to the Michigan Supreme Court reinstating the ESTA voter initiative.


More details can be found here: https://www.michigan.gov/leo/bureaus-agencies/ber/wage-and-hour/paid-medical-leave-act

Montana


The state’s minimum wage will increase to $10.55 per hour (up from $10.30 per hour) effective January 1, 2025.

Nebraska


Effective January 1, 2025, the state’s minimum wage will increase to $13.50 per hour, up from $12 per hour. The tip credit will increase to $11.37 per hour from $9.87 per hour. The minimum cash wage rate remains at $2.13 per hour.

New Jersey


The minimum wage effective January 1, 2025 for most employers will increase to $15.49 per hour, up from $15.13 per hour. The minimum cash wage for tipped employees will increase to $5.62 per hour (up from $5.26 per hour). The tip credit remains $9.87 per hour.

New York


For 2025, the paid family leave employee contribution will be 0.388% of gross weekly wages up to an annual maximum of $354.53. Currently, the employee contribution is 0.373%, up to an annual maximum of $333.25. The 2025 PFL wage base is $91,373.88 (up from the current wage base of $89,343.80).

Ohio


Effective January 1, 2025, the state’s minimum wage will increase to $10.70 per hour (up from $10.45 per hour). The tip credit will increase to $5.35 per hour, up from $5.20 per hour. Employers grossing less than $394,000 (currently $385,000) annually can pay employees the federal minimum wage rate of $7.25 per hour.

Oregon


The state’s Workers’ Benefit Fund Assessment Rate will remain at 2 cents per hour or partial hour for 2025.

Pennsylvania


The employee unemployment contribution rate for 2025 remains at 0.07%.

South Dakota


The state’s minimum wage will increase to $11.50 per hour, up from $11.20 per hour. The minimum cash wage for tipped employees will increase to $5.75 per hour, up from $5.60 per hour.

Utah


The workers compensation insurance premium tax rate is decreasing to 1.2% in 2025.

Washington


Effective January 1, 2025, the state’s minimum wage will increase to $16.66 per hour, up from $16.28 per hour. No tip credit is allowed in Washington. Workers who are 14 or 15 years old may be paid a youth wage that is 85% of the adult minimum wage, or $14.16 per hour (currently $13.84 per hour). The white-collar overtime exemption salary threshold will increase to 2x the state minimum wage for small employers with up to 50 employees, which will be $1,332.80 per week or $69,305.60 per year. For large employers with 51 or more employees, it will increase to 2.25x the minimum wage, which will be $1,499.40 per week or $77,968.80 per year. 

The Paid Family Medical Leave Rate increases to 0.92% in 2025, with the employer portion 71.52% and the employer portion 28.48%.

Tools You Can Use

Electronic Pay Solutions


Employees like to get paid on time. Sometimes that’s harder than it might seem. With delivery issues, severe weather, and wildfires frequently in the news and maybe even your backyard, getting paychecks to employees can be difficult. That’s where electronic payroll solutions like direct deposit and pay cards can be a great solution.


Electronic pay solutions can also save you money. The costs of both printing and delivery are going up, which increases your payroll fees. With direct deposit and pay cards, employees can access their pay stubs and year-end Forms W-2 and 1095 online through the Mize payroll portal.


Read more about the benefits of electronic pay from our Insights blog by clicking here.  

Earned Wage Access

 

Even if employees get paid on time, sometimes that money doesn’t stretch until the next payday. Stuff happens – the washing machine overflows, the car breaks down, or somebody gets sick. Sometimes employees need money sooner than later, but there aren’t a lot of great options. Payday loans, overdrawing their checking account, and incurring credit card debt can chock up high fees. The employer can give a pay advance or loan, but that can put you in a difficult position.


That’s where an Earned Wage Access (EWA) program can help. EWA programs are a new employee benefit that advances employees a certain amount or percentage of their accrued wages. The employee’s next paycheck is automatically reduced by the advanced amount, with no risk or liability to the employer.


For more information about ZayZoon, the EWA program offered through Mize CPAs, click here or visit with your Mize professional.

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