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  • October 2020

The Vita Blog October 2020

  1. IRS Announces Retirement Plan Limits for 2021

    System Administrator – Wed, 28 Oct 2020 22:18:49 GMT – 0

    The Internal Revenue Service has announced the 2021 cost-of-living adjustments (COLAs) to the various dollar limits for retirement plans.1  The Social Security Administration (SSA) has also announced the taxable wage base for 2021.

      2021 2020
    Elective Deferral Limit (401(k) & 403(b) Plans)     $19,500 $19,500
    Catch Up Contributions (Age 50 and over) $6,500 $6,500
    Annual Defined Contribution Limit $58,000 $57,000
    Annual Compensation Limit       $290,000   $285,000
    Highly Compensated Employee Threshold $130,000 $130,000
    Key Employee Compensation $185,000 $185,000
    Social Security Wage Base $142,800 $137,700



    Definitions

    Elective Deferral Limit means the maximum contribution that an employee can make to all 401(k) and 403(b) plans during the calendar year (IRC section 402(g)(1)).

    Catch-up Contributions refers to the additional contribution amount that individuals age 50 or over can make above the Elective Deferral and Annual Contribution limits. Catch-up contributions were initiated under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and made permanent by the Pension Protection Act.

    Annual Contribution Limit means the maximum annual contribution amount that can be made to a participant's account (IRC section 415). This limit is expressed as the lesser of the dollar limit or 100% of the participant's compensation, and is applied to the combination of employee contributions, employer contributions and forfeitures allocated to a participant's account.

    Annual Compensation Limit means the maximum compensation amount that can be considered in calculating contribution allocations and non-discrimination tests. A plan cannot consider compensation in excess of this amount (IRC Section 401(a)(17)).

    Highly Compensated Employee Threshold means the minimum compensation level established to determine highly compensated employees for purposes of non-discrimination testing (IRC Section 414(q)(1)(B)).

    Social Security Wage Base is the maximum amount of earnings subject to Social Security payroll taxes.

    1Source: https://www.irs.gov/pub/irs-drop/n-20-79.pdf

    2021 Health Savings Account (HSA) Limits
    2021 Pre-Tax Contribution Limits

    Securities are offered only by individuals registered through AE Financial Services, LLC (AEFS), member FINRA/SIPC. Investment advisory services offered through Liberty Wealth Management LLC, a Registered Investment Adviser with the SEC. Insurance offered through Vita Insurance Associates, Inc. CA Insurance License 0581175. DBA Vita Companies. AEFS is not an affiliated company with Liberty Wealth Management, or Vita Companies.

    • Retirement
  2. IRS Announces Pre-Tax Contribution Limits for 2021

    System Administrator – Wed, 28 Oct 2020 22:18:05 GMT – 0

    The Internal Revenue Service recently announced annual inflation adjustments for 2021. IRS Rev. Proc. 2020-45 provides that for taxable years beginning in 2021, the following maximums apply for Health Flexible Spending Arrangements, Adoption Assistance Programs, and Commuter Benefits:

    Health FSA Limit: The annual Health FSA limit will stay the same at $2,750 in 2020 and $2,750 in 2021. The Health FSA rollover amount for 2021 will be $550 (this is 20% of the regular election maximum).

    Adoption Assistance Limit: The annual Adoption Assistance limit will increase from $14,300 in 2020 to $14,400 in 2021.

    Commuter Benefits Limits: The monthly transit and parking limits will both remain the same at $270 in 2020 and $270 in 2021. 

    If you are a Vita Flex FSA Client who currently offers the IRS maximum and your plan renews January 1, 2021, your limits have been automatically increased for the 2021 plan year, unless you have previously requested otherwise. Any participant that has already made an election at the previous maximum will be contacted in order to confirm their desired election amount.

    If you are a Vita Flex Commuter Benefits Client, the monthly pre-tax limit will be automatically increased to the IRS maximum for the January benefit month.

    2021 Health Savings Account (HSA) Limits
    2021 Retirement Plan Limits

    • Pre-Tax
  3. DOL Proposes Rule to Clarify Independent Contractor Status

    System Administrator – Thu, 01 Oct 2020 23:25:34 GMT – 0

    The U.S. Department of Labor (DOL) has proposed new regulations for clarifying whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). Independent contractors, including many gig-economy workers, are not eligible for minimum wage, overtime and other benefits that employees must receive. The proposed rule adopts an "economic reality" test to determine a worker's status as an employee or independent contractor.

    The DOL has indicated the proposal is intended to provide clarity and consistency for employers and workers. In addition, streamlining and clarifying the test to identify independent contractors aims to reduce worker misclassification and reduce litigation.

    “Once finalized, it will make it easier to identify employees . . . while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.”

    Eugene Scalia
    Secretary of Department of Labor

    “Economic Reality” Test

    Status as an employee or independent contractor would be determined by looking to the “economic reality” of the relationship. Specifically, the test distinguishes whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee).

    The proposed rule outlines two “core factors” making employment determinations:

    1. Nature and degree of worker’s control over the work. [more details]
    2. Opportunity for profit or loss based on the worker’s own initiative, investment, or both. [more details]

    Three other factors are identified that may serve as additional guideposts in the analysis, but which are given less weight:

    1. Skill required for the work
    2. Permanence of the working relationship between the worker and the potential employer
    3. Whether the work is part of an integrated unit of production.

    Lastly, actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.

    What’s Next

    There will be a 30-day comment period after the proposed rule's official publication in the Federal Register.  Employers should watch carefully as these rules are finalized and plan to review and confirm existing independent contractor relationships and establish clear guidelines for future employment relationships.

    More Details on Core Factor #1

    This first factor suggests that an individual is an independent contractor to the extent that he or she exercises substantial control over key aspects of the performance of the work. Elements that help define substantial control would include setting their own work schedule, selecting projects, working with little or no supervision, and being able to work for others (including a potential employer’s competitors).

    By contrast, the control factor would weigh in favor of a worker being classified as an employee to the extent the employer, rather than the individual, exercises substantial control over key aspects of the work. This would include any requirement that the individual work exclusively for the employer during the working relationship.

    Lastly, requiring an individual to comply with specific legal obligations, satisfy health and safety standards, independently carry insurance, meet contractually agreed-upon deadlines or quality control standards, or satisfy other similar terms that are typical of contractual relationships between businesses would not constitute control that makes the individual more or less likely to be an employee.

    More Details on Core Factor #2

    The second factor suggests that an individual is an independent contractor if he or she has an opportunity for profit or loss based on either:

    • Personal initiative, managerial skill, or business acumen.
    • Management of investments in or capital expenditure for the business (for example, helpers, equipment, technology, or materials).
    • Compliance
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