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Supreme Court sides with employee in reprisal suit. Resolving a circuit split, the US Supreme Court held that an employee can prevail in a retaliation case against an employer when the employer’s actions are reasonably likely to deter the employee from pursuing discrimination claim. The Court’s decision in Burlington Northern and Santa Fe Railway Co v White (No 05259) was released on June 22 and written by Justice Stephen Breyer. The case involves Sheila White, an employee of the Burlington Northern & Santa Fe Railway Co. White complained of sexual discrimination and days later was transferred to a more strenuous job. After she objected to the transfer, the company suspended her for 37 days without pay. White appealed the suspension, which the company overturned with back pay. White sued in federal court, claiming unlawful retaliation by Burlington. A jury awarded her compensatory damages. The circuit court also found for White, agreeing that Burlington’s actions in changing her job responsibilities and suspending her without pay amounted to unlawful retaliation under Section VII of the Civil Rights Act of 1964. In interpreting Section VII’s anti-retaliation language, the Supreme Court determined that the language seeks to prevent an employer from interfering with an employee’s efforts to pursue enforcement of the act’s basic guarantees against racial, ethnic, religious or gender-based discrimination. The anti-retaliation provision, the Court found, is not confined to actions by an employer that concern employment and the workplace. “The scope of the anti-retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm,” the Court wrote. But Title VII’s anti-retaliation provision does not protect an employee from all retaliation, only retaliation that causes harm, according to the Court. As to whether an employee has a valid retaliation claim, the circuit courts have been split on the correct standard to apply. The Supreme Court’s opinion should settle that issue. The Court adopted the position of the Seventh and the District of Columbia Circuit Courts: A retaliation plaintiff must show that a challenged action “well might have ‘dissuaded a reasonable worker from making or supporting a charge of discrimination.’” The Court found that reassignment of job duties can constitute retaliatory discrimination. So too can the loss of income, even if the employee later receives back pay. “Many reasonable employees would find a month without a paycheck to be a serious hardship,” the Court said. Interim rule on electronic I-9 effective June 15, 2006. The Department of Homeland Security (DHS) has created an interim rule amending its regulations to provide that employers and recruiters or referrers for a fee who are required to complete and retain the Employment Eligibility Verification form (Form I-9), may sign and retain this form electronically. The interim rule implements statutory changes to the Form I-9 retention requirements by establishing standards for electronic signatures and the electronic retention of the Form I-9. An employer that is currently complying with the recordkeeping and retention requirements of the current regulation is not required to take any additional or different action to comply with the revised rules. The revised rules offer an additional option. Businesses will be permitted to adopt one or more of a number of different electronic recordkeeping, attestation, and retention systems that are compliant with the existing IRS standards. For example, a small business may wish to download and retain .pdf versions of the employment verification record. DHS made this system available on the US Citizenship and Immigration Services (USCIS) website at http://www.uscis.gov. Employers who already utilize electronic data recordkeeping as part of their accounting and tax functions may expand those functions to include the employment verification process. As long as the electronic records system remains IRS-compliant, the system will be ICE-compliant. Background. Section 274A of the Immigration and Nationality Act (Act), 8 USC 1324a, requires all United States employers, agricultural associations, agricultural employers, farm labor contractors, or persons or other entities who recruit or refer persons for employment for a fee, to verify the employment eligibility and identity of all employees hired to work in the United States after November 6, 1986. To comply with the law, an employer, or a recruiter or referrer for a fee, is responsible for the completion of the Form I-9 for all employees, including United States citizens. Completed Forms I-9 are not filed with the federal Government. Instead, the completed I-9 form is retained by the employer. Employers are required to retain Forms I-9 in their own files for three years after the date of hire of the employee or one year after the date that employment is terminated, whichever is later. Recruiters or referrers for a fee are required to retain the Forms I-9 for three years after the date of hire. The failure to properly complete and retain the Forms I-9 subjects the employer to civil money penalties. The interim rule was developed, drawing upon work begun under the legacy Immigration and Naturalization Service, as well as relying on standards developed by other federal agencies utilizing electronic retention and signature methods. On December 10, 2004, at the request of the United States Chamber of Commerce, DHS representatives met with the Electronic I-9 Coalition. This Coalition consisted of representatives from a wide array of business interests. The Chamber of Commerce facilitated the meeting so the Coalition members could express views to DHS regarding the importance of the statute and to offer insight on methods of storage and attestation being contemplated by the business community. DHS representatives listened to the views presented, but could not offer any guidance on specific aspects of the regulation. DHS has carefully considered the views expressed and, to the extent practical and in the public interest, incorporated those suggestions. There are a number of potential advantages that employers may gain through use of electronic Forms I-9. Many employers may experience cost savings by storing Forms I-9 electronically rather than using conventional filing and storage of paper copies or transferring the forms to microfilm or microfiche. Electronic forms may allow employers to better ensure that each Form I-9 is properly completed and retained. Some employers may find that electronic completion and storage renders the process less prone to error. Electronically retained Forms I-9 are more easily searchable, which is important for re-verification, quality assurance and inspection purposes. This will be especially helpful and cost-effective for large employers that have job sites across the country or that have high employee turnover rates. The DHS's interim rule is effective June 15, 2006. Written comments must be submitted on or before August 14, 2006. Comments, identified by docket number, may be submitted by one of the following methods:
For further information, please comment: Jim Knapp, Associate Legal Advisor, Bureau of Immigration and Customs Enforcement, Room 6100, 425 I St, NW, Washington, DC 20536. Telephone (202) 514-8138 (not a toll-free number). DHS's interim rule on electronic signature and storage of Form I-9, Employment Eligibility Verification, appears in the June 15, 2006 Federal Register (71 FR 34510). DHS proposes amendments to procedures for employers receiving "no-match" letters. The Department of Homeland Security (DHS) proposes to amend regulations relating to the unlawful hiring or continued employment of unauthorized aliens. The amended regulation describes the legal obligations of an employer, under current immigration law, when receiving a "no-match" letter from the Social Security Administration (SSA) or DHS. Typically, when a employee's Social Security number does not match their name on tax or employment eligibility documents, the federal government sends out a "no-match" letter asking employers to resolve the discrepancy. The proposed rule also describes "safe-harbor" procedures that an employer can follow in response to such a letter and thereby be certain that DHS will not find that the employer had constructive knowledge that the employee referred to in the letter was an alien not authorized to work in the United States. The proposed rule also adds two more examples of situations that may lead to a finding that an employer had constructive knowledge to the current regulation's definition of "knowing." These additional examples involve an employer's failure to take reasonable steps in response to either of two events: (1) receiving written notice from the SSA that the combination of name and social security account number submitted to SSA for an employee does not match agency records; or (2) receiving written notice from DHS that the immigration-status or employment-authorization documentation presented or referenced by the employee in completing Form I-9 was not assigned to the employee according to DHS records. (Form I-9 is retained by the employer and made available to DHS investigators on request, such as during an audit). The proposed rule also states that whether DHS will actually find that an employer had constructive knowledge will depend on the totality of relevant circumstances. The "safe-harbor" procedures include attempting to resolve the no-match and, if it cannot be resolved within a certain period of time, verifying again the employee's identity and employment authorization through a specified process. Written comments. Written comments on the proposed amendments must be submitted on or before August 14, 2006. Individuals may submit comments, identified by DHS Docket No ICEB-2006-0004, by one of the following methods:
For further information please contact: Charles Wood, Regulatory Counsel, Office of the Principal Legal Advisor, Bureau of Immigration and Customs Enforcement, Department of Homeland Security, 425 I Street, NW, Washington, DC 20536. Contact Telephone Number (202) 514-2895. The proposed amendments appear in the June 14, 2006 Federal Register (71 FR 34281).
OFCCP publishes two finalized notices on systemic compensation bias. The Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) has published two finalized policy notices on systemic compensation discrimination. Both notices were published in the Federal Register on June 16, 2006 (71 FR 35114-35122 & 35124-35141). The first notice is entitled, "Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance With Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination" and contains guidelines for federal contractors' self-evaluation of compensation practices. The second notice is entitled, "Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination" and contains standards regarding systemic compensation discrimination that the OFCCP will use in enforcing Executive Order 11246 (EO 11246). Proposed versions of both notices were published in the Federal Register on November 16, 2004 (69 FR 67246-67255). Background. The OFCCP enforces EO 11246 which requires federal contractors and subcontractors to implement affirmative action programs and to guarantee equal employment opportunity in the workplace without regard to race or gender. The agency conducts compliance reviews to determine whether covered contractors have been engaging in workplace discrimination prohibited by EO 11246. As part of its compliance review process, the OFCCP investigates whether contractors' pay practices are discriminatory. OFCCP compliance reviews typically produce cases that involve allegations of systemic discrimination, not discrimination against a particular individual employee. OFCCP systemic compensation discrimination cases typically are proven under a disparate treatment, pattern or practice theory of discrimination. Voluntary guidelines for contractors. Until the current notice, the OFCCP had not provided guidance to contractors or to OFCCP personnel on suggested techniques for compliance with the compensation self-evaluation requirement contained in the OFCCP's regulations. These voluntary guidelines are intended to provide suggested techniques for complying with the compensation self-evaluation requirement. The agency has included an incentive for contractors to adopt voluntarily the general methods outlined in these voluntary guidelines. Specifically, if a contractor, in good faith, reasonably implements the general methods outlined in the guidance, the OFCCP will coordinate its compliance monitoring activities with the contractor's self-evaluation approach. The OFCCP emphasized, however, that these guidelines are entirely voluntary. Thus, compliance with the guidelines is not required for compliance with OFCCP regulations and the guidelines are not the only way to comply. Moreover, the OFCCP has attempted to provide voluntary guidelines that are technically sufficient to withstand judicial scrutiny so that contractors do not face potential liability for implementing a robust and effective self-evaluation program. Enforcement standards. The systemic compensation discrimination analysis as set forth in the OFCCP final enforcement standards has two major characteristics: (1) The determination of employees who are "similarly situated" for purposes of comparing contractor pay decisions will focus on the similarity of the work performed, the levels of responsibility, and the skills and qualifications involved in the positions; and (2) the analysis relies on a statistical technique known as "multiple regression". "Similarly situated" employees. Under the OFCCP's final standards, employees are similarly situated with respect to pay decisions where the employees perform similar work, have similar responsibility levels, and occupy positions involving similar qualifications and skills. Because an OFCCP enforcement action may be subject to review in a federal court that does not adopt the "similarly situated" standard, the Department of Labor will address this issue on a case-by-case basis. A contractor's preexisting groupings developed and maintained for other purposes, such as job families or affirmative action program job groups, may provide some indication of similarity in work, responsibility level, and skills and qualifications. However, these preexisting groupings are not dispositive, and OFCCP will not assume that these groupings contain similarly situated employees. Thus, the OFCCP will investigate the relevant circumstances. Multiple regression analysis. In addition to determining groups of employees that are "similarly situated," enforcement of systemic compensation discrimination under EO 11246 requires that the comparison take into account legitimate factors that affect compensation. In order to account for the influence of such legitimate factors, a statistical analysis known as "multiple regression" must be used. Multiple regression is explained in the Federal Register notice as follows: Multiple regression analysis is a statistical tool for understanding the relationship between two or more variables. Multiple regression involves a variable to be explained -- called the dependent variable -- and additional explanatory variables that are thought to produce or be associated with changes in the dependent variable. For example, a multiple regression analysis might estimate the effect of the number of years of work on salary. Salary would be the dependent variable to be explained; years of experience would be the explanatory variable. Multiple regression analysis is sometimes well suited to the analysis of data about competing theories in which there are several possible explanations for the relationship among a number of explanatory variables. Multiple regression typically uses a single dependent variable and several explanatory variables to assess the statistical data pertinent to these theories. In a case alleging sex discrimination in salaries, for example, a multiple regression analysis would examine not only sex, but also other explanatory variables of interest, such as education and experience. The employer--defendant might use multiple regression to argue that salary is a function of the employee's education and experience, and the employee-plaintiff might argue that salary is also a function of the individual's sex. Daniel L. Rubenfeld, Reference Guide on Multiple Regression, in Federal Judicial Center, Reference Manual on Scientific Evidence, at 181 (2d ed. 2000). The multiple regression model must include those factors that are important to how the contractor in practice makes pay decisions. These factors could include the employees' education, work experience, seniority in the job, time in a particular salary grade, performance ratings, and others. The OFCCP generally will attempt to build the regression model in such a way that controls for the factors that the investigation reveals are important to the employer's pay decisions, but also allows the agency to assess how the employers' pay decisions affect most employees. One factor that must be controlled for in the regression model is categories or groupings of jobs that are similarly situated based on the analysis of job similarity noted above (i.e., similarity in the content of the work employees perform, and similarity in the skills, qualifications, and responsibility levels of the positions the employees occupy). This will ensure that the analysis compares the treatment of employees who are in fact similarly situated. In addition, the OFCCP will investigate the facts of each particular case to ensure that factors included in the regression are legitimate and are not themselves influenced by unlawful discrimination, which is often discussed in case law as a factor "tainted" by discrimination. However, the OFCCP will not automatically presume that a factor is tainted without initially investigating the facts of the particular case. The OFCCP will determine whether a factor is tainted by evaluating proof of discrimination with respect to that factor, but not based on the fact that the factor has an influence on the outcome of a regression model that includes the factor. "Pooled" regression. The factors that influence pay decisions may not bear the same relationship to compensation for all categories of jobs in the employer's workforce. For example, performance may have a more significant influence on compensation for a high-level executive, than for technicians or service workers. This issue must be addressed through either of two methods. One method is to perform separate regressions for each category of jobs in which the relationship between the factors and compensation is similar (while including category factors in each regression that control for groupings of employees who are similarly situated based on work performed, responsibility level, and skills and qualifications). If separate regressions by categories of jobs would not permit the OFCCP to assess the way the contractor's compensation practices impact on a significant number of employees, the OFCCP may perform a "pooled" regression, which combines these categories of jobs into a single regression (while including an OFCCP-developed category factor in the "pooled" regression that controls for groupings of employees who are similarly situated based on work performed, responsibility level, and skills and qualifications). However, if a pooled regression is used, the regression must include appropriate "interaction terms" in the pooled regression to account for differences in the effects of certain factors by job category. The OFCCP will run statistical tests generally accepted in the statistics profession (e.g., the "Chow test"), to determine which interaction terms should be included in the pooled regression analysis. Disparities must be "statistically significant." Systemic compensation discrimination under Executive Order 11246 must be based on disparities that are "statistically significant," i.e., those that could not be expected to have occurred by chance. To ensure uniformity and predictability, the OFCCP will conclude that a compensation disparity is statistically significant under the final standards if it is significant at a level of two or more standard deviations, based on measures of statistical significance that are generally accepted in the statistics profession. Moreover, the OFCCP states it will seldom make a finding of systemic discrimination based on statistical analysis alone, but will obtain anecdotal evidence to support the statistical evidence. Fact Sheet posted. The OFCCP has posted a "fact sheet" regarding the two finalized notices on its website at: https://www.dol.gov/esa/ofccp/compfs.htm. Labor Department seeks comment on OLMS information collections. The Employment Standards Administration of the Department of Labor is currently soliciting comments concerning the proposed collection: Labor Organization and Auxiliary Reports (LM-1, LM-2, LM-3, LM-4, LM-10, LM-15, LM-15A, LM-16, LM-20, LM-21, LM-30, and S-1). Current actions. The Department of Labor (DOL) seeks extension of the current approval to collect this information. An extension is necessary because the LMRDA explicitly requires the reporting and establishes the frequency of the required filings. The information collected by OLMS is used by union members to help self-govern their unions, by the general public, and as research material for both outside researchers and within the Department of Labor. The information is also used to assist DOL and other government agencies in detecting improper practices on the part of labor organizations, their officers and/or representatives, and others and is used by Congress in oversight and legislative functions. In addition to making Forms LM-2, LM-3, LM-4, LM-10, LM-20, LM-21, and LM-30 (from fiscal year 2000 to the present) available to the public online free of charge through its Internet Public Disclosure Room, (http://www.dol.gov/esa/regs/compliance/olms/rrlo/lmrda.htm), OLMS receives and fulfills approximately 210 disclosure report requests per month. A copy of the proposed information collection request can be obtained by contacting the office listed below. Comments sought. Written comments must be submitted on or before August 7, 2006 to: Ms. Hazel M. Bell, U.S. Department of Labor, 200 Constitution Ave., NW., Room S-3201, Washington, DC 20210. Comments may also be submitted by fax: (202) 693-1451, or e-mail: bell.hazel@dol.gov. Use only one method of transmission for comments (mail, fax, or e-mail). Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record. Final rule requires federal sector unions to give members notice of their "bill of rights." On June 2, 2006, a final rule requiring federal sector labor organizations to notify their respective members of a "bill of rights" contained in the Standards of Conduct regulations of the Civil Service Reform Act was published by the Office of Labor-Management Standards (OLMS) (71 FR 31929, June 2, 2006). These rights include the right to have a voice in setting dues, access to bargaining agreements and the right to sue, among other rights. Under the rule which becomes effective on July 3, 2006, federal sector labor organizations have until October 2, 2006 to provide this notice and must re-notify their membership every three years. The rule also requires new members to be notified within 90 days of joining a federal union. The notice can be given by any method reasonably calculated to reach all members. Thus, federal unions may opt to use the Department of Labor (DOL) publication Union Member Rights and Officer Responsibilities Under the Civil Service Reform Act (see text reproduced below) to meet their obligation under the new rule or devise an alternative method of informing their membership of their rights. Delivery of the notification can be by hand, mail or email, or electronic notification via a union web site with a conspicuous link to the DOL publication. DOL is charged with enforcement and investigation of complaints but can initiate its own investigations under the new rule. This rule covers federal employee unions subject to the standards of conduct provisions of the Civil Service Reform Act of 1978 (5 U.S.C. §7120), the Foreign Service Act of 1980 (22 U.S.C. §4117(d)), or the Congressional Accountability Act of 1995 (2 U.S.C. §1351(a)(1)). The following bill introduced over the month made:
Bankruptcy priority for plan contributions does not include workers' compensation premiums, High Court rules. The priority assigned by the US Bankruptcy Code to unsecured creditors' claims for unpaid contributions to an "employee benefit plan" does not encompass claims for unpaid workers' compensation premiums an employer owes to an insurance carrier, the Supreme Court ruled. Such premiums are more appropriately categorized with premiums paid for other liability insurance, such as motor vehicle, fire, or theft insurance, than with contributions made to secure employee retirement, health, and disability benefits, the Court held. The Court's 6-3 decision reversed the decision of the Court of Appeals for the Fourth Circuit and resolved a split among the circuits on this priority status issue. (Howard Delivery Service, Inc v Zurich American Insurance Co) Unpaid workers' compensation premiums. Howard Delivery Service, Inc. (Howard) employed as many as 480 workers in its freight trucking business that operated in about a dozen states. Each of those states required Howard to maintain workers' compensation coverage to secure its employees' receipt of health, disability, and death benefits in the event of on-the-job accidents. Howard contracted with Zurich American Insurance Co. (Zurich) to provide this insurance for Howard's operations in ten states. After Howard filed a Chapter 11 bankruptcy petition, Zurich filed an unsecured creditor's claim for some $400,000 in premiums, asserting that these unpaid premiums qualified as "contributions to an employee benefit plan" entitled to priority under Bankruptcy Code §507(a)(5). The Bankruptcy Court denied priority status to Zurich's claim, reasoning that overdue premiums do not qualify as bargained-for benefits furnished in lieu of increased wages, and, as such, they fall outside §507(a)(5). The district court affirmed, similarly determining that unpaid workers' compensation premiums do not share the priority provided for unpaid contributions to employee pension and health plans. Although the Fourth Circuit reversed, the judges in the majority disagreed on the rationale. Wages, employee benefit plan priorities adjoined. The Court first discussed the purpose and structure of the employee benefit plan priority in §507(a)(5) in relation to the wage priority of §507(a)(4) as a basis for its conclusion that unpaid workers' compensation premiums fall outside §507(a)(5). The Court explained that two of its decisions under prior bankruptcy law prompted the enactment of §507(a)(5). In those cases, the Court found that neither an employer's unpaid contributions to a union welfare plan nor an employer's bargained-for contributions to an employees' annuity plan qualified as "wages" entitled to priority status. To provide a priority for fringe benefits of the kind at issue in those two cases, Congress thereafter enacted what is now §507(a)(5). The Court wrote that it was notable that Congress did not expand the wage priority, but instead created a new priority – one step lower than the wage priority – that allows a plan provider to recover unpaid premiums only after the employees' claims for wages have been paid. The linkage of these two subsections shows Congress' understanding that fringe benefits are generally a substitute for wages, according to the Court. As such, the employee benefit plan priority covers wage substitutes only. Definition of employee benefit plan. Despite the tight link of these priority subsections, the Court recognized that Congress did not define the §507(a)(5) terms: "contributions to an employee benefit plan ... arising from services rendered." The Court declined to borrow the encompassing definition of employee benefit plan contained in ERISA. Although the Court acknowledged the definition of the term "employee benefit plan" in ERISA §3(1) could be construed to include workers' compensation plans, it also noted that ERISA §4(b)(3) specifically exempts from ERISA's coverage the genre of plan at issue in this case --workers' compensation. The Court concluded Congress did not include directions in §507(a)(5) establishing the significance of a term used elsewhere in the federal statutes, and that the Court itself was not authorized to write such directions into the text. Essential character of workers' compensation regimes. The Court finally concluded the case turned on "the essential character of workers' compensation regimes." The Court explained that workers' compensation prescriptions differ from pension provisions or group life, health and disability plans in that the former substitute for the common-law tort liability to which employers were exposed for work-related accidents, while the latter substitute for wages. Workers' compensation regimes provide something for both employees and employers, assuring limited fixed payments for on-the-job injuries and removing the risk of large judgments and heavy costs generated by tort litigation, respectively. This trade-off does not exist with employer-sponsored fringe benefits, the Court noted. In addition, employer-sponsored pension and health plans insure the employee (or his or her survivor) only. In contrast, workers' compensation insurance, like other liability insurance, such as fire, theft, and motor vehicle insurance, shields the insured enterprise, the Court said. Another significant difference between the two is that nearly all states, with limited exceptions, require employers to participate in their workers' compensation systems with penalties for failure to do so. States regulate insurance coverage for on-the-job accidents, while commonly leaving fringe benefits to private arrangement, the Court noted. IRS issues guidance on leave-sharing plans for those affected by major disasters. A leave donor – an employee who deposits accrued leave in an employer-sponsored leave bank for use by other employees adversely affected by a major disaster (a "major disaster leave-sharing plan") – does not realize income or have wages, compensation, or rail benefits with respect to the deposited leave if certain conditions are met, according to IRS Notice 2006-59. First, the plan must treat payments made by the employer to the leave recipient as "wages" for purposes of FICA (the Federal Insurance Contributions Act), FUTA (the Federal Unemployment Tax Act), and income tax withholding; as "compensation" for purposes of RRTA (the Railroad Retirement Tax Act); and as "rail wages" for purposes of RURT (the Railroad Unemployment Repayment Tax), unless otherwise excluded by the Code. Second, a leave donor may not claim an expense, charitable contribution, or loss deduction on account of the deposit of the leave or its use by a leave recipient. A major disaster leave-sharing plan is a written plan meeting a number of requirements, which are spelled out in the Notice. Among those requirements are the following:
SOURCE: Notice 2006-59, I.R.B. 2006-28, June 19, 2006. CMS issues reminder on processing notifications for drug subsidy program. The Centers for Medicare & Medicaid Services' (CMS) Retiree Drug Subsidy Center (RDS Center) has issued a reminder to plan sponsors about the importance of processing notification information. A notification is a message from the RDS Center regarding a qualifying covered retiree and his or her RDS coverage. CMS notifies the RDS Center when there is an event (e.g., change in Medicare entitlement, death of the retiree, enrollment in Medicare Part D) that may impact a plan sponsor's ability to receive a subsidy for a retiree. The RDS Center indicates it is imperative that these notifications are processed by plan sponsors in a timely manner to ensure that accurate subsidy periods are posted in their internal systems so that the appropriate cost calculations and payment requests are made.
IRS finalizes FICA rules on several types of "service". The Internal Revenue Service (IRS) has finalized previously issued rules on several types of "service". The final regulations cover payments made for services not in the course of the employer's trade or business, for domestic service in a private home of the employer, for agricultural labor, and for service performed as a home worker under Code Sec. 3121(d)(3)(C). The regulations provide guidance to assist the employers that make these payments and the employees who receive these payments in complying with the law. The employer is generally permitted, but not required, to deduct amounts equivalent to employee tax from cash payments to an employee if the amount of such payments in a calendar year equals: (1) $100 for services not in the course of the employer's trade or business and for those performed as a home worker; (2) the applicable dollar threshold defined in Code Sec. 3121(x) for domestic services in a private home of the employer; and (3) $150 for agricultural labor. ( 71 FR 31153, June 19, 2006.) IRS reminds businesses to classify workers correctly. The IRS has released a fact sheet reminding businesses to properly classify their workers for tax purposes. A worker's classification determines whether the business must withhold income taxes, withhold and pay social security and medicare taxes, and pay unemployment tax on compensation paid to that worker. Most workers are classified as either employees or independent contractors. The main factor in determining how to classify a worker is the degree of control the business has over the worker, based on the facts and circumstances. If a business incorrectly classifies a worker, it could be subject to penalties. Businesses can use Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to have the IRS make the determination. The IRS website features Form SS-8 and other information on worker classification and classification correction. (IRS Fact Sheet, FS-2006-21, June 21, 2006) IRS/SSA announce electronic filing changes. The IRS and Social Security Administration (SSA) have announced several changes for electronic filing. Batch provider software. Tax professionals that prepare and pay federal taxes for clients or multiple Taxpayer Identification Numbers (TIN), have a secure way to make up to 1,000 payments in one transmission using the newly updated Batch Provider Software from the Electronic Federal Tax Payment System (EFTPS). The latest version of the free software contains many enhancements designed to make paying easier:
The EFTPS Batch Provider Software allows tax professionals to set roles and responsibilities for multiple users of the software. If the EFTPS Batch Provider Software will be used by more than one person, levels of access for each of the users can be set allowing central control of who can view, update, add or remove payments from the database. There is also a Calendar to help keep track of payment due dates, holidays and communications with other users of the software. As part of the software upgrade, EFTPS will send e-mail notifications regarding enrollments, payments and upgrades. In addition, a dedicated Tax Professional Customer Service Help Line (800-945-0966) is available for any problems users might have. The User's Manual and Quick Start Guide (go to http://www.eftps.gov) will help tax professionals get started with a step-by-step process. Call EFTPS Batch Provider Customer Service at 800-945-0966 to request the software on a CD. Mandatory electronic filing. Companies that now file with the SSA on diskette will be required to file electronically starting in tax year 2006 (W-2s due in calendar year 2007), as the SSA will no longer accept diskettes. Similarly, the SSA no longer accepts W-2s filed on magnetic tape and cartridges. Companies that file on magnetic tape, cartridges, or diskettes format their reports according to the SSA's MMREF format. Filing electronically uses the same MMREF format, so re-programming is not necessary. Filers need only to follow the same year-end process, but rather than copying the files onto a tape, cartridge, or diskette filers will log onto the Web site and upload the file. For security purposes, filers will need to register first for a PIN and password. Some filers may already have a PIN since a PIN was required in the RA - Submitter Record in wage reports. EDI discontinued. The IRS recently announced plans to discontinue the acceptance of Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, and Form 941, Employer's Quarterly Federal Tax Return, that are transmitted in the EDI and Proprietary formats. Participants currently using the EDI and Proprietary formats can transmit Form 941 for the 3rd quarter until November 13, 2006. After that time, the IRS will no longer accept e-file transmissions in these formats. Decline in use of these formats, combined with increasing costs to maintain these formats, prompted this decision. The IRS will continue to support the Employment Tax e-file System which utilizes the Extensible Markup Language (XML) standard for the transmission of Forms 940/941. The Employment Tax e-file System provides greater flexibility for filing Forms 940/941 electronically. See http://www.irs.gov/efile/article/0,,id= 118519,00.html for more information on the Employment Tax e-file System (XML) and how it can improve the filing process. 3 1/2-inch diskettes eliminated. Effective January 1, 2007, the IRS Enterprise Computing Center in Martinsburg, WVA (IRS/ECC-MTB) will no longer accept information returns filed on 3 1/2-inch diskettes. IRS/ECC-MTB encourages filers to file electronically on the Internet using the FIRE (Filing Information Returns Electronically) system at http://fire.irs.gov (if the link does not work, try to copy and paste it into the browser window).
PBGC final regs provide formula for calculating liability of employers that close facilities. The Pension Benefit Guaranty Corporation (PBGC) has published final regulations codifying a formula for calculating the liability of employers maintaining single-employer plans that cease operations, where the cessation of operations results in the separation from employment of more than 20% of participants in the employer's defined benefit plan. ERISA §4062(e), which governs single-employer plans, does not address the apportionment of total liability with respect to the cessation of operations. Previously, when such a cessation occurred, an employer could be treated as a substantial employer under multiple controlled groups, and therefore, the provisions of ERISA §4063(b) applied. Under ERISA §4063(b), liability is allocated to the withdrawing employer based upon a ratio of the employer's required contributions to all required contributions for the five years preceding withdrawal. New formula has been used on case-by-case basis. The formula for determining liability that appears in ERISA §4063(b) has been deemed by the PBGC to be impractical for single employers, so the PBGC had, instead, been using another formula on a case-by-case basis. The final regulations codify that formula, which is as follows: an employer's liability will be its liability under ERISA §4062(b), which is generally equal to the total amount of unfunded benefit liabilities as of the termination date (including interest), multiplied by a fraction equal to the number of employees who are participants and who are separated from employment due to the cessation of operations divided by the total number of employees who are participants immediately prior to the cessation of operations. Note: while liability under ERISA §4063(b) is determined on the date of withdrawal by the substantial employer, total liability under ERISA §4062 will be determined under the final rules as if the plan had been terminated by the PBGC immediately after the cessation of operations. The amount is placed in escrow for the benefit of the plan. In the event the plan terminates within five years, the payment is treated as a plan asset. If the plan does not terminate within five years, the amount is returned to the employer. An employer may be required to provide a bond to the PBGC to be held for the plan in lieu of the liability payment. The PBGC predicts that, because this method has already been in use on a case-by-base basis, the final regulations will have little or no effect on the amount of employers' liability. The final regulations are effective as of July 17, 2006. PBGC selects more plans to audit on standard terminations. The PBGC has recently changed its audit selection methodology for standard plan terminations. Previously, the PBGC selected for audit all plans with a participant count of 500 or more participants, as well as a random sample of plans with less than 500 participants. Recently, the PBGC revised its method to include all plans with a participant count of 300 or more participants in compulsory audits. Plans with less than 300 participants will continue to be selected randomly for audit. The PBGC selects plans for audit on a quarterly basis from plan terminations completed in the previous calendar quarter. Plans are chosen for audit in April, July, October, and January each year. US Labor Secretary Elaine L. Chao announces PBGC Acting Executive Director. US Secretary of Labor Elaine L. Chao announced that former US Rep. Vincent K. Snowbarger will serve as acting executive director of the Pension Benefit Guaranty Corp. (PBGC) effective immediately. Snowbarger has served as PBGC's deputy executive director since November 2004 and will act as an interim replacement for Bradley D. Belt, who announced his departure on March 23 and completed his term on May 31. Additionally, Snowbarger served as the PBGC's assistant executive director for legislative affairs from June 2002 until November 2004. The PBGC currently guarantees payment of basic pension benefits for approximately 44 million American workers and retirees participating in more than 31,000 private-sector defined-benefit pension plans. "Vince has been a significant part of the PBGC team," said Secretary Chao, who is chair of the PBGC board of directors. "His willingness to serve as acting executive director during this interim, but important, time is very much appreciated." Snowbarger represented Kansas' 3rd Congressional District from 1997 until 1999, serving on the Banking and Financial Services, Small Business and Government Reform, and Oversight Committees. Before his election to Congress, Snowbarger served 12 years as a member of the Kansas House of Representatives, where he held the post of majority leader from 1993 until 1997. His legislative assignments there included the committees on Taxation, Pensions and Investments and Labor and Industry. In addition to his service as an elected official, Snowbarger has enjoyed a successful career as an attorney in private practice. He also taught business law and insurance at MidAmerica Nazarene University in Olathe, Kan., and served as executive director of the Kansas Association of American Educators. Snowbarger is a 1971 graduate of Southern Nazarene University and earned a master's degree from the University of Illinois and a J.D. from the University of Kansas. PBGC mandates electronic premium filing. The PBGC has issued final regulations mandating electronic premium filing for large plans beginning in July 2006. Under the final rules, for 2006 plan years, large plans (with 500 or more participants the prior plan year) making premium filings on or after July 1, 2006, will be required to file electronically. Smaller plans will be required to file electronically for plan years beginning after 2006. Plans may apply for exemptions on a case-by-case basis. Large plan paper filings are acceptable before July 1. Although the PBGC lauds the reduction in errors promised by electronic filing, the PBGC noted that some large plans still had a window in which to file using paper Forms 1-ES. For example, a 2006 estimated filing for a large plan with a plan year beginning May 1 that is made by June 30, 2006, may be made using a paper Form 1-ES. In contrast, a large plan with a plan year beginning July 1 and an estimated filing deadline of July 31, 2006, would be required to make its estimated premium filing electronically if made on or after July 1. If this plan were to file on or before July 1, 2006, however, the estimated premium filing could be made using paper Form 1-ES. Enhancements provide more flexibility to filers. Filings are required to be submitted through the PBGC's online e-filing application "My Plan Administration Account" or "My PAA." Enhancements have been made to My PAA to provide more flexibility to premium filers. In early 2006, My PAA was revised to permit importation of draft filings that have been prepared with private-sector software into the My PAA data entry and editing screens. Premium payments may be made online. E-filers may pay premiums online through their secure My PAA account by credit card, electronic check or Automated Clearing House transfer or outside My PAA by paper check or wire transfer. At some future date, payments may be required to be made online.
SSA proposes regs to protect anonymity of agency employees. The Social Security Administration (SSA) is proposing to amend its privacy and disclosure rules in order to preserve the anonymity of, and help protect the well being of its employees who believe that they are at risk of injury or other harm if certain employment information about them were to be disclosed. Under current policy, requests for telephone numbers and work locations of agency employees may be honored. However, the proposed amendment would permit the SSA to withhold the work location and telephone numbers of employees who reasonably believe that they are at risk of injury or other harm by the disclosure of such information. In general, such information would not be released if the information would reveal more about the employee on whom the information is sought than the information itself, if the information would constitute a clearly unwarranted invasion of personal privacy, or if the disclosure is otherwise protected from mandatory disclosure under the Freedom of Information Act.Comments on the proposal may be sent to one of the addresses listed in the notice of proposed rulemaking as published in the Federal Register (71 FR 32494). Comments are due by August 7, 2006. SSA to renew program with BPD for verifying SSI eligibility. The SSA has announced its intention to renew an existing computer matching program designed to verify eligibility and payment amounts of individuals under the Supplemental Security Income (SSI) program. The current matching program is set to expire on June 25, 2006. Under this matching program, the Administration provides the Bureau of Public Debt (BPD) with the Social Security numbers of individuals who have applied for, or receive SSI payments. This information, in turn, is matched with information in BPD files of savings-type securities registration (US savings bonds, treasury securities, etc.). Matched records will be supplied to the Administration, which, in turn, will determine if the data pertains to the relevant SSI applicant or beneficiary. The program will renew no sooner than 40 days after notice is sent to Congress and the Office of Management and Budget, or June 23, 2006, whichever is later. The SSA has finalized new regulations that amend current procedures for imposing civil monetary penalties. The SSA has finalized new regulations that amend current procedures for imposing civil monetary penalties. The amendments revise current rules by holding representative payees liable for the wrongful conversion of Social Security benefits and by adding a provision that imposes penalties for withholding disclosure of material information to the SSA. Current rules are also amended by prohibiting offers that charge fees for services provided for free by the agency unless sufficient notice is given. Finally, the rule changes will also reflect the addition of Title VIII, Special Benefits for Certain World War II Veterans, to the Social Security Act, and subject individuals to civil monetary penalties for violations of that title. The finalized regulations are effective June 16, 2006, except that Reg. §498.102(d) (relating to penalties that the Office of Inspector General (OIG) may impose against advertisers who improperly charge a fee for services offered by the SSA for free) will be effective December 16, 2006.
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