Day: September 16, 2022

IRS Changed Certain Deadlines for SECURE Act and CARES Act Amendments

If you’ve been racing to comply with SECURE and CARES Act retirement plan amendment deadlines, take a breath! In August, the IRS issued Notice 2022-33 extending some deadlines.

As reported by the Society for Human Resource Management (SHRM), private sector 401(k) plan sponsors who took advantage of benefit changes under the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief and Economic Security (CARES) Act were previously required to make plan amendments this year. The deadline for:

Calendar year plans were originally December 31, 2022.
Non-calendar year plans were the last day of the first plan year beginning on or after January 1, 2022.
Collectively bargained plans were the exception, with the deadline being the last day of the first plan year after the start of 2024.

The IRS notice issued August 3 pushed the deadline back to December 31, 2025, for both calendar year and non-calendar year plans, with a few exceptions: Under the CARES Act, the amendment deadline for loans, in-service withdrawals, and temporary suspension of loan repayments remain unchanged.

It is important to note, there are different deadlines for government plans. Government sponsors of 457 (b) plans and 403(b) plans for public school employees have until 90 days after the close of the third regular session beginning after December 31, 2023, to amend the plan (although the deadline for certain 457(b) amendments resolving compliance issues may be later).

The SECURE Act requires employers to extend eligibility for certain part-time employees starting in 2024; ease withdrawals by new parents for birth or adoption expenses; and permanently increase the start date for minimum distributions from age 70 ½ to 72. However, it’s important to note that further guidance is pending.

The CARES Act, which offered flexibility to employers during COVID, suspended minimum distribution requirements in 2020 and made it easier for new parents to make withdrawals for birth or adoption expenses. Plan loan limits were also doubled to the lesser of $100,000 or 100% of a vested account balance.

Should you need professional assistance with adopting the amendments, making the effective date retroactive, and operating plans as if the amendments are in effect, our Spectrum Pension and Compensation Inc. affiliate can help. For almost 30 years, Spectrum has been assisting employers in the Hudson Valley and beyond with employee benefits, including retirement plans, health insurance, and life insurance. The Spectrum team is available to provide technical assistance in plan design, compliance, administration, and record keeping. Click here for their contact information.

For accounting, auditing, and tax support, RBT CPAs is always here to help. Give us a call.

Recession-Proof Your Company, Just In Case

Will there be a recession? Are we already in one? How will construction be impacted? While the debates rage on, it’s prudent to prepare your business, just in case.

Starting with some basics, Investopedia says, “A recession is a significant, widespread, and prolonged downturn in economic activity.” While construction is not typically a recession-proof industry, there are steps construction companies can take now to strengthen their ability to withstand economic uncertainties.

Construction Dive’s recent article “What a Recession Would Look Like for Construction” (Obando, Sebastian. August 16, 2022) says preserving cash, building backlog, and going after Federal contracts is a winning game plan according to a few sources. In addition, we’ve identified seven tips repeatedly mentioned by a variety of sources to help construction companies prepare for and ride out a recession. Here they are:

Stick to what you know, what you do really well, and what’s profitable, and then focus on that.
Keep a close watch on your business’ finances and have a financial plan. Focus on managing projects to promote profitability and do what you can to ensure contracts protect your interests. Know your costs and look for opportunities to reduce expenses. Hold off on large purchases. Preserve cash (see our prior post on “Tips to Help You Manage Cash Flow During Volatile Times.”) Build emergency funds to help cover expenses for at least three to six months. Pay down debt while you have the money so you can also build credit worthiness should you need to tap into additional resources in the future. Also, be smart about financing and loans – make sure you know what’s available through the Small Business Administration, the state, and the Federal government.
Do not rely on backlog. Have a strategy for consistently drumming up new business over the next six to 18 months and focus on a long sales cycle.
Keep your best workers. While downsizing is a typical reaction to a recession, the construction industry is in a unique situation because of the labor shortage plaguing the industry. If possible, hold onto your best employees – and even look for new ones – to adequately staff jobs and be in a better position after the downturn.
Look for Federally funded and local municipalities’ projects – there are plenty of them (including new opportunities from the Inflation Reduction Act) and they can serve as a lifeline.
Stay close to customers. Build and maintain open communication and strong relationships. By keeping the conversation going and seeing what you can do to support your customers, you build positive relations and garner information to help you strategize.
Do some scenario planning. Gather your top people around a table to speculate about what may happen. Then, proactively develop a plan for how you’ll respond, so you can act quickly.

And perhaps we’re a bit biased but one other thing you can do is partner with RBT CPAs for all of your accounting, tax, and audit needs. For over 50 years, we’ve worked with businesses across the Hudson Valley and beyond to deliver professional, quality, and ethical services that deliver peace of mind. That way, our clients can focus on what they do best. To learn more, give us a call.

What NYS 2022 School District Audit Reports Can Teach Us

During the 2020-2021 school year, New York State audited over 105 school districts for compliance with everything from budgeting and claims auditing to procurement and mental health training (plus a whole lot more). Reports summarizing findings and key recommendations are posted on the Office of the State Comptroller website. Since auditing is part of our DNA (we’re accountants, after all) we figured we’d take a look and summarize findings that may be of interest to you.

We reviewed all the 2022 result reports posted as of September 8 of this year. Of the districts audited, less than ten met all prescribed requirements; the balance received key recommendations on how to improve services, processes, and more going forward. More than a few audits uncovered potential savings opportunities ranging from several hundred dollars to several hundred thousand dollars. One even resulted in an arrest for misappropriation of funds!

Below you’ll find highlights of findings for the five areas audited most frequently. Perhaps you’ll come across a few items to help your district save time and money.

Mental Health Training Under the New York Students Against Violence in Education (SAVE) Act

Out of the 20 districts audited, two provided all 12 recommended components of mental health training for all staff by September 15, 2020, as required by law. The audit results, which made headline news, noted whether all 12 training components were made available to all staff; whether the district tracked attendance; and whether training was completed by the September 15 deadline.

Network Access Controls/User Accounts

19 districts were audited. None met all requirements which included regular reviews and updates of network user accounts for necessity and appropriateness; immediately disabling unneeded accounts; having written procedures for managing system access; regularly reviewing and securing access with proper user permissions to the network and financial application; having a password security policy; having a policy clearly stating what is an acceptable use of a district computer, how you monitor compliance and provide training; having clear roles and responsibilities for cybersecurity; having an up-to-date disaster recovery plan that has been shared with all responsible parties; periodically comparing installed software to an authorized software inventory list, and reviewing whether you are at risk for data loss and operational disruption. More sensitive issues were communicated confidentially to school officials.

Procurement

16 districts were audited. None met all requirements which included ensuring goods and services are always procured in the best interest of taxpayers; seeking competition for professional services in accordance with a written procurement policy; periodically reviewing service provider contracts to determine the need for new RFPs; having a written procurement policy specifying when and how frequently officials should issue RFPs and including detailed guidance for procuring goods and services not subject to competitive bidding or when there is no possible competition; having the Board review the policy annually; saving on things like fuel by using the Office of General Services (OGS) fuel card program or state contract; comparing bills against awarded contract prices to ensure billing is correct and does not include taxes and unnecessary fees; awarding contracts in a manner consistent with New York State General Municipal Law; and fully evaluating and comparing benchmark rates before entering a contract.

Financial Management & Controls

14 districts were audited; none met all requirements, which included having a realistic budget; managing fund balance properly and in accordance with the law; having an adopted budget accurately estimate appropriations to fund options; being transparent about funding reserves; having appropriate workers’ compensation reserves, unemployment insurance reserves, and a retirement contribution reserve fund; not levying more taxes than needed to fund operations; discontinuing unnecessary appropriations of fund balance; using overfunded reserves to benefit district residents; keeping surplus fund balance at or below the 4% statutory limit; creating accurate and reliable financial reports; Finance Committee participation in budgeting and review of reports; consulting legal counsel regarding excess reserve funds, as well as the appropriate remedy for addressing improper funding of and transfer of reserve funds; having a debt reserve and using funds to pay debt as required; having a written reserve policy establishing targeted or optimal funding levels; and having the Board define financial objectives including purpose, funding goals, conditions for fund use and replenishment.

IT Related

12 districts were audited. Interestingly, the four that were audited for compliance with FCC Internet bandwidth and download speed met all requirements. Requirements that were not met include having and testing an IT contingency plan to minimize operational disruptions; having a written policy detailing proper use of fixed IT assets; having procedures to affix tags to assets; tracking inventory and equipment, conducting an annual physical inventory, and removing devices not in service; and having your server room establish physical security and environmental controls.

What about the remaining audits? Four focused on claims auditing; three focused on Extra Classroom Activity Funds; five were on salary, wages, and leave benefits; three were on capital projects; one focused on website transparency and another focused on electronic records and reports; two were on non-resident student tuition; three were on special education services and Medicare reimbursements; and one was conducted for each of the following – electronic records and reports, online banking, safeguarding personal, private and sensitive information on mobile computing devices, property disposal, and transportation department operations. For more details, visit the NYS Comptroller website to review audit reports.

While you’re using audit results to help your district operate more efficiently and effectively, remember, RBT CPAs is here to partner with you on financial audits, accounting, taxes, and more. We’ve been partnering with school districts and institutions of higher education for over 50 years in the Hudson Valley and beyond. Interested in learning more? Give us a call.

Retain Valued Employees: Promote Public Service Loan Forgiveness and Special One-time Waiver

Are you looking for another way to attract, retain, and engage employees? Remind your employees about the Public Service Loan Forgiveness (PSLF) program, as well as a special waiver only in effect until October 31, 2022 that may credit borrowers for payments that didn’t qualify in the past.

According to a press release issued by the U.S. Department of Education on August 23, “It has approved more than $10 billion in debt relief for over 175,000 borrowers in 10 months through the Public Service Loan Forgiveness (PSLF) program. This follows changes the Department announced in October 2021 that transformed the program by changing certain rules to make it easier for public servants with federal student loans to have their debts canceled.”

About the Program

The Federal Student Aid website explains, “The PSLF Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.” This will likely be a welcome reminder for eligible employees who are looking at resuming student loan payments starting January 1, 2023.

In general, if you are a U.S. federal, state, local or tribal government organization, your employees may be eligible. (Employees of certain non-profit organizations may also be eligible.) Eligible interested employees can use the PSLF Help Tool to certify employment each year; apply for forgiveness after meeting all requirements; and generate the required form for submission. Complete details are available on the Federal Student Aid website and on the FedLoan Servicing website.

About the Limited Time Special Waiver: Deadline October 31, 2022

The PSLF waiver provides a limited-time opportunity for expanded loan forgiveness. Past payments may now be considered for PSLF, even if they wouldn’t normally qualify. With the waiver, employees may increase total number of qualifying payments; include periods of employment not previously counted due to loan type or repayment history, and seek forgiveness on older loans by consolidating them into Direct Loans. Full details are available here.

Promoting the Program & Waiver

If your employees haven’t heard about this special perk of being a public service employee since their initial onboarding or orientation or just never took advantage of PSLF, now is the perfect time to remind them – especially given the tight labor market and competition for talent (not to mention the October 31 special waiver deadline). Consider sending a reminder email, doing a desk-drop, or holding a lunch and learn to review key details, answer questions, and encourage employees to take advantage of this valuable perk. The Department of Education developed a toolkit containing sample promotional language and pieces.

While focusing on promoting this perk, if you should need any accounting, tax, or auditing assistance, RBT CPAs is available to help. We’re a leading accounting firm in the Hudson Valley and beyond, with extensive experience serving government organizations and municipalities. Visit our website or give us a call today.

How New York Modifiers for Workers’ Comp Rates Are Changing October 1

Like many states, New York has used the National Council on Compensation Insurance (NCCI) to determine the experience modifier (Mod) for calculating Workers’ Compensation (WC) premiums. After careful evaluation, the New York Compensation Insurance Rating Board (NYCIRB) decided to create its own rating plan and to withdraw from the NCCI interstate rating plan effective October 1. Overall, the NYCIRB rating plan gives employers more incentive (a.k.a., lower WC premiums) to focus on safety and reduce workplace injuries.

The NYCIRB and your insurance company will determine your Mod based on several factors and formulas.

Your business will continue to be assigned a four-digit classification code, which is used to group similar employers. However, under the NYCIRB rating plan, six classifications are being eliminated and integrated into other codes.

To start, the expected loss amount or total anticipated loss during an experience period (the timeframe that the policies being used to determine the Mod were in effect) will be determined. It is calculated for each classification using this formula:

Expected Loss Rate (ELR) X payroll)/100

Then, the results for all classifications are added together to calculate expected losses.

Next, a split point is determined. The split point divides losses for each claim into primary and excess components using a dollar value. Split points vary based on expected losses during an experience period for each classification. They range from $1,000 for the smallest risks to $170,000 for the largest.

The split point is used to determine an employer’s corresponding D-ratio, which is assigned based on the ratio of primary losses to expected losses for each class and risk size.

Expected Primary Losses = expected losses for the classification X D-Ratio
Expected Excess Losses = expected loses – expected primary losses
Actual Primary Losses = reported losses limited by the split point value

Finally, the new modifier (based on experience rather than merit) is calculated:

Mod = (Actual Primary Losses + Expected Excess Losses)/Expected Losses

There’s one more thing that will happen: a new capping methodology which protects against overly harsh Mods will be applied. For one claim, the maximum Mod is 1.12; for 2 claims, the max is 1.4; for 3 claims, the max is 1.75; and for four or more claims, the max is 2 + .000003 X expected losses. For the first year (October 1, 2022 through September 30, 2023), if a Mod under the new plan is more than what it would have been under the prior formula using updated experience by more than .30, the Mod will be capped at the Mod resulting from the prior formula plus .30.

You can find more details in the NYCIRB Experience Rating Plan Manual. For change highlights, including an example and updated rating worksheet, refer to the NYCIRB’s Changes to the Experience Rating Program Explained pamphlet. You may also want to check out the Mod Estimator tool on the NYCIRB’s website and this video explaining the new formula.

It’s definitely a lot to take in but the good news is insurance companies will be doing the calculations. We just want to make sure you’re aware of them because they may result in a decrease (or increase) to your WC premiums come October 1 and give you another reason to focus on your workplace safety efforts.

If you have any questions about this or any accounting, tax, or auditing topic, please don’t hesitate to reach out to RBT CPAs.