Welcome to the July edition of the Mize Payroll Newsletter!


Court Ruling on New Overtime Rule


We’ll get started with the status of the new exempt salary thresholds – the salary levels that determine whether an employee is subject to overtime. New thresholds went into effect July 1, 2024 and as expected, resulted in some legal challenges. In one of those lawsuits, State of Texas v. US Dept. of Labor, the court agreed that the US Department of Labor’s overtime rule is “likely unlawful.” The court determined that the new law exceeds the DOL’s statutory authority and focuses more on salary than duties in determining whether an employee can be exempt from overtime pay.


But it’s important to note that this ruling only applies to the State of Texas as an employer and not private employers in the state or any other employers outside of Texas.


We will continue to watch this issue for any further developments and will keep you informed.


Credit Reduction States for 2024


If states have an outstanding Federal Unemployment loan on January of at least two consecutive years as well as on November 10 of the second year, they are subject to a credit reduction on their Federal Unemployment Tax rate until the loan has been paid off. This then affects employers in those states who pay a higher unemployment rate.


For 2024, three states – California, Connecticut, and New York – will likely be subject to this higher federal unemployment rate, along with the US Virgin Islands.


Retirement Plan Distributions Exempt from 10% Withdrawal Penalty


Distributions from qualified retirement plans such as 401(k)’s are generally subject to both ordinary income taxation as well as a 10% withdrawal penalty unless they meet certain exceptions. SECURE 2.0 added two exceptions that took effect January 1, 2024:


Emergency personal expenses. An employee can take a distribution from an eligible retirement plan to meet unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses. Such distributions cannot be taken more than once per calendar year and are limited to a maximum of $1,000. If an individual has an emergency personal expense distribution in any calendar year, that individual cannot have another emergency personal expense distribution during the next three calendar years unless the previous distribution is fully repaid to the plan or the employee’s contributions to the plan are at least equal to the amount of the previous distribution that has not been repaid.


Victims of domestic abuse. If the employee is a victim of domestic abuse by a spouse or domestic partner, they can withdraw the lesser of $10,000 or 50% of the present value of the nonforfeitable accrued benefit under the retirement plan.


More information about retirement plan distribution rules can be found on the IRS website by clicking here.

State By State News

Arkansas


Retroactive for wages paid on or after January 1, 2024, the state has issued new withholding tables that should be used beginning July 1, 2024. The state’s supplemental wage tax rate is reduced to 3.9% from 4.4%.

Colorado


Effective February 1, 2026, the state will regulate creators and users of “high risk” artificial intelligence (AI) systems. A high-risk system is one that makes or is a substantial factor in making a consequential decision that has a legal or significant effect on the provision or denial of services, including employment decisions.

Connecticut


Effective January 1, 2025, employers with 25 or more employees will be required to provide paid sick leave (the current threshold is 50 or more employees). The threshold will go down to 11 or more employees effective January 1, 2026 and down to 1 employee effective January 1, 2027. More information is available on the state’s website by clicking here.

Delaware


Delaware’s new retirement savings program, called Delaware EARNS, launched July 1, 2024. Employers have until October 15, 2024 to register for EARNS or certify their exemption if they already have a qualified retirement program such as a 401(k) plan. The program applies to employers with five or more W-2 employees. There is no cost to employers for facilitating the program.

Eligible employees must be at least 18 years of age and have earned taxable wages from a Delaware employer for at least 120 days. Employees will be automatically enrolled in the program at the default contribution rate of 5% of gross income but have the option to opt out or change their contribution rate.


All employers register through the Delaware EARNS website, https://earnsdelaware.com/.


If the employer already has a retirement plan, they can certify their exemption from the program as part of the registration process.


To register you will need your Employer Identification Number (EIN) and an Access Code. You can use your EIN to search for your access code to begin the process. Once you have this information you can either register or certify your exemption. You will need to know what sort of retirement program you have (i.e., 401(k), SIMPLE IRA, etc.) to certify your exemption. If you do not have a qualified retirement plan, you will need to register your business and begin uploading your employee information.


If you’re a Mize CPAs payroll client, we’re happy to assist you in the registration and certification process. We will also facilitate the reporting to the employer portal with each payroll.

Georgia


Revised withholding tables have been issued effective for wages paid on or after January 1, 2024. The state’s supplemental wage tax rate is also changed to 5.39%.

Hawaii


Effective June 21, 2024, workers who earn $4,000 or more a month (increased from $2,000) are exempt from the definition of “employee” for several state labor laws including minimum wage.

Minnesota

Effective January 1, 2025, the state will have one minimum wage rate that applies to all employers. Currently there are two rates, $10.85 per hour for large employers and $8.85 per hour for small employers.


Also, effective August 1, 2024, tips received by an employee through debit, credit, charge card, or electronic payments must be credited to the employee in the pay period in which the gratuity was received.

When it comes to Mize Payroll 2.0, Ann knows it all! Check out her latest 2.0 tips:





Have a tip or trick you'd like Ann to cover? Let her know, ahobart@mizecpas.com

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 back yard, 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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