Bryan Dear’s Blog

I love the challenge of starting at zero every day and seeing how much I can accomplish. - Martha Stewart

Retirement plans are a great benefit for employees – they come in all shapes in sizes and one plan may look very different from another plan. SIMPLE IRA plans are relatively simple compared to 401K plans, but they are not without complication. If you have less than 100 employees, establishing a SIMPLE retirement plan is one of the lowest cost retirement plans an employer can offer.

From a payroll perspective, it goes something like this.

The employee may contribute up to $11,500 a year in 2010 and if they’re fity or older, may contribute an additional $2,500 for a grand total of $14,000 for the year.

In general, the employer must match up to the lesser of the employee’s contribution or 3% of gross compensation for the year. Gross compensation includes bonuses, overtime pay, vacation, sick and personal use of auto in addition to regular pay. However, gross compensation must be reduced by Section 125 deductions (Cafeteria plans such as pre-tax AFLAC, FLEX spending, Dependent Care, etc.). A good rule to determine gross compensation is Box 1 wages from the W2 plus the employee’s Simple Contribution. This definition of gross pay becomes important in determining the 3% match from the employer if the employee has contributed more than 3%.

The employer does have a couple of additional options. They may reduce their match from 3% to 2% two years out of every five years. The employer may elect to just contribute 2% to every employee retirement account regardless of whether they contribute or not.

How much should an employee contribute? One very general rule of thumb is for employees to contribute 10% of their gross pay a year. If the employer is kicking in 3%, then the employee would contribute 7% of their compensation.

The employee contribution must be made within thirty days after it is deducted from pay. The employer contribution can be made at that time, but the employer may also wait to make their contribution until the filing of their tax return. Regardless of when the employer makes the contribution, the match amount should be compared to the W2 Box 1 amounts and employee simple contribution to determine what the match should have been so that adjustments can be made.

Employee withdrawls after age 59 and a half are subject to federal and state income taxes. Employee withdrawls prior to that time are taxed for the full account value with an additional 10% tax thrown in with some limited exceptions. Employee contributions are deducted pre-tax for federal and state taxes, but not FICA and Medicare.

Employer plans can be set up with the big guys such as Vanguard and Fidelity or they can be set up with a local broker who may provide more guidance and personal service. There’s usually a greater fee with a broker which is found in higher asset fees.

SIMPLE plans are a great way for an employer to enter the retirement benefits arena. They are relatively easy to set up and provide a wonderful vehicle to help provide employees with a retirement plan.

Keep it simple,

Bryan Dear

www.payrolldept.biz

We learn geology the morning after the earthquake. Ralph Waldo Emerson, 1803 – 1882

I’m not sure where my house key is and that’s because we don’t lock our doors. I mean really, what would a thief take? Our TV? Our furniture? They could take the laptop, but even there we don’t keep much personal information on it and we certainly don’t keep passwords on a file in our computer. If someone did break into our house, we would at least have the option to start changing account information to prevent loss of data or money from falling into the wrong hands.

It’s a different set of rules for the cyber world. You may not realize your identity has been stolen. It’s a much quieter theft. The theft can occur from somewhere you have no control over.  It can be scary to realize how much information is available in the electronic world that concerns you. And there you sit comfortably at home or at the office thinking that all is safe and secure when in reality the stuff is about to hit the fan.

So what are you to do? Drop out of society? Do you move all of your electronic data to paper and create a tremendous amount of inconvenience for yourself while still making yourself vulnerable to a different kind of theft from paper? I doubt it. What follows is a game plan for your life when it comes to data protection.

You are entitled to a free credit report from one of the three credit agencies once a year (beware of the free credit report agencies that want you to sign up for a paying service). You may go order this free service by going to www.annualcreditreport.com

Review your report carefully for accuracy noting any activity from creditors that you did not initiate.

You may place a “Fraud Alert” on your credit report by calling any one of the following agencies – a call with one will place the alert with all three agencies. The number is: Equifax – 800-525-6285 / Experian 888-397-3742 / TransUnion 800-680-7289

We here at The Payroll Department, Inc. deal with incredibly sensitive information. From a thief’s perspective, we are a gold mine. We do everything we can to keep your data confidential including multiple firewalls, strong passwords, data encrpytion as well as many dual controls in the office. And still, we are vulnerable. Recently, our software vendor, Paychoice, was attacked and our online clients were provided with a phishing email noting they needed to update their software. If you have one iota of doubt about whether something is from us, contact us. We would not ask you to download something from an email without contacting you by phone, fax or written notice.

I don’t sleep well when I think our data could be hacked. It’s an amazing world full of grace, but evil lurks there too.

We’ll protect from evil – we’ll love the grace – and we’ll keep our data safe.

Sincerely,

Bryan Dear

www.payrolldept.biz

Thinking is easy, acting is difficult, and to put one’s thoughts into action is the most difficult thing in the world. Johann Wolfgang von Goethe, 1749 – 1832

When you run a payroll every two weeks, you can reliably compute twenty six payrolls a year (26 x 2 = 52 weeks). If you pay salaried employees on this bi-weekly schedule, you may have taken the annual salary (e.g. $52,000 and divided by the 26 weeks for a bi-weekly salary of $2,000 per payroll). This is all fine and good for most years.

However, every so often there are twenty seven payrolls because three hundred sixty five days divided by fifty two leaves a remainder of one day. Leap year enters into the equation so really it’s only every eleven years or so that twenty seven bi-weekly payrolls will occur in your payroll calendar.

Do you pay the salaried person for the “extra” payroll ? In the first example, you could pay your salary person the additional $2,000 and proceed as normal. Many employers, however, believe they have contracted with their salaried employee an annual salary or a monthly salary. The reasoning goes that the fact that there happens to be an additional payroll should have no bearing on their annual or monthly salary.

If you choose to forgo paying your salaried employees, you’ll want to be very clear in your communications with them including providing them with plenty of notice so they can plan their finances accordingly. Look ahead in the calendar.

January 1, 2010 falls on a Friday. Depending upon your bi-weekly pay schedule, next year might be the 27 payroll year. Or if you move January 1,2010 to December 31, 2009, you may have 27 payrolls this year (2009).

Take a peek at your calendar for this year and the next. If you see twenty seven payrolls, you’ll have a head start on whichever way you proceed.

Cheers,

Bryan Dear

www.payrolldept.biz