All NY Employers Must Give Sick Leave To Workers: Here’s what to Know

All NY Employers Must Give Sick Leave To Workers: Here’s what to Know

Why is it so important to learn about The New York Paid Sick Leave (NYSPSL) law that was passed back in April, right now? Because in just two short weeks, accruals of NYSPSL must begin, so that means employers need to be ready. For the first time in New York State’s history, this sick leave requirement ensures that the vast majority of workers in the state have the right to paid sick time for a variety of reasons that we will outline below. It also prohibits employers from firing or retaliating against workers for taking sick time. This new law is applicable to all private employers regardless of size. Employers with between 5 and 99 employees (and employers with 4 or fewer employees and a net income of greater than $1 million in the prior tax year) must provide each employee with up to 40 hours of paid sick leave per year. Employer with 100 or more employees must provide up to 56 hours of paid sick leave per year. Employers with less than four employees and a net income under $1 million still need to provide five unpaid sick days. Who qualifies? Full-time, part-time, temporary, seasonal, and per diem employees.

Do I still need to pay attention if I already give my team sick leave?

If you’re an employer reading this and thinking, well I already provide paid sick leave for my employees so this update doesn’t pertain to me, stop moving your mouse towards the close out button, and keep reading. It’s crucial that you’re aware of the new changes in place so your policy and procedures, as well as your employee handbook, plainly outline the new guidance. If you fail to clearly communicate these changes to your employees, you could be walking into a litigation nightmare. For example, in most PTO policies do not start at date of hire, nor do they start allowing for accruals to start immediately, and they don’t typically include a 40 hour annual roll over. Well, that’s all about to change. Supervisors and managers need to be well versed in these updates to avoid potential risk for retaliation, discrimination and litigation. Keeping yourself and your team in the loop with all of these changes is important to protect your business, so be diligent!

When can employees start using NYPSL?

Employees will begin accruing NYPSL on September 30, 2020 however, employees may only begin using NYPSL on January 1, 2021. New employees hired after January 1, 2021 may use NYPSL immediately upon accrual. Employees accrue 1 hour for every 30 hours they work. Employers have the option to frontload the 40 hours on January 1st or start accruing on Sept 30th. If you’re operating in an industry that has a workforce base with a lot of part-time workers, a consistently high turnover rate, or seasonal temps working multiple shifts, it makes more financial sense to go on an accrual basis. Frontloading is recommended for industries with low turnover and more fulltime/exempt employees, because these businesses will find less fluctuation in calculations.

So how can an employee use their NYPSL?

Employees can use it for a variety of reasons. Beyond using NYPSL for an employee’s own mental or physical illness, or injury, the expanded list includes use for a family member illness or for victims of sexual and domestic violence. Employers may set a reasonable increment for the use of NYPSL, the maximum for which may not exceed four hours.

Should I be keeping a record of sick leave usage?

Short answer: Yes! You’re now required to keep track of accrual and use records, and you need to make this information available within three days of an employee’s request. If your business isn’t already using an electronic system to organize your payroll or time tracking, you’ll quickly realize how very cumbersome and tedious this new tracking system can be. If this change is exposing a glaring issue in your business structure, it could be time to modernize your system to create more fluidity in your workflow.

What steps should my business take in light of this new law?

Employers should start reviewing existing leave policies, including attendance and incentive programs to determine whether they meet the new requirements and should update employee handbooks as necessary. New York employers will have to implement paid sick leave policies if they do not currently have leave available to employees, which may require a review or overhaul of other leave or PTO policies. Employers can adjust an existing policy but the language needs to include use, accrual and carry over according to the Department of Labor guidelines.

We are still waiting on further guidance from New York State regarding some outstanding questions related to the PSL legislation. We will continue to make you aware of updates and information from the state as the law continues to take shape. If you need immediate assistance implementing this new law, feel free to contact Visions Human Resource Services, LLC by emailing Jgiannetta@VisionsHR.com for more information.

Municipalities borrowing from municipalities in New York State: Is it right for you?

Municipalities borrowing from municipalities in New York State: Is it right for you?

As New York local governments cast about for strategies to manage funds and generate revenue to weather the economic hardships of the COVID-19 pandemic, some could benefit from a little-known provision of New York law that allows municipalities to borrow from one another.

Because municipalities in different parts of the state or the region may be experiencing widely varied effects of the virus and shutdown, this somewhat esoteric strategy presents another option in the face of state holdbacks of aid to cities, towns, villages and school districts. When properly executed, the lender and the borrower may get better-than-market-rate returns and terms.

Because local government must keep taxpayer funds safe and liquid so they may be used for public benefit, municipalities are limited in the types of investments they may make. These include time or deposit accounts in banks or trust companies located in New York and authorized to do business in the state; certificate of deposit accounts issued by those banks; and obligations such as bonds, notes or other forms of indebtedness issued by certain entities, according to the Office of the State Comptroller. Obligations of U.S. and New York State governments, and “in certain cases, New York State local governments are permissible investments,” according to the OSC’s Local Government Management Guide for Investing and Protecting Public Funds.

According to New York’s Local Finance Law, “Bond anticipation notes may be issued by any municipality, school district or district corporation in anticipation of the sale of bonds. Such notes may be issued whenever bonds have been authorized and the proceeds of such notes shall be expended only for the same object or purpose, or class thereof for which the proceeds of such bonds may be expended.”

The strategy involves short-term debt obligations, most commonly bond anticipation notes. Bond anticipation notes are often used as temporary funding to initiate large capital projects. Once those projects have begun, the municipality will typically issue serial bonds to fund the project over a period of 20 to 30 years. Bond anticipation note terms can be extended beyond one year within the restrictions of Local Finance Law and are generally limited to a maximum of five years.

How does a municipality go about starting the process?

One way would be to solicit a request for proposal (“RFP”). For example, if a town in Orange County finds itself with excess cash, it could circulate an RFP to other municipalities that are looking to borrow, letting them know the original town will offer terms better than market rate for the investment. Generally, this would be done through bond anticipation notes, with one-year maturity and a fixed rate.

The borrowing municipality would get the better rate as well as fewer fees, while the lender also gets a better rate of return than it might have gotten in the marketplace.

Of course, it behooves the borrowing municipality to make sure it is comfortable with the lending government, and the transactions must be approved by the respective boards. The lending municipality must also determine that it has plenty of excess cash available during the entire loan period, and therefore plenty of money to lend.

This little-known practice of municipalities borrowing from other municipalities can provide solutions and benefits for both sides of the equation while allowing local governments to exercise prudent and responsible stewardship of taxpayer funds.

COVID-19 Impact on Retirement Plans

Covid-19 Business Impact on Retirement Plans

Businesses that have survived the initial economic shockwave caused by the COVID-19 pandemic have a lot to be proud of.

However, with the unpredictability of the fall season looming, it’s important to understand how the decisions you make today will impact your business tomorrow.

We previously communicated to our clients and friends the provisions of The CARES Act which was passed back in March in response to the COVID-19 pandemic. The CARES Act allowed sponsors of retirement plans to amend their plans to permit coronavirus-related distributions (CRD) for participants directly impacted financially. This included plan withdrawals, changes in loan limits, waiver of RMD requirements, and elimination of the 10% excise tax for distributions made to participants prior to age 59 ½. Please remember that plan documents, company policies and handbooks may need to be revised if you adopted these changes.

At this time we want to highlight the provisions within the Internal Revenue Code relating to partial termination which can be triggered by COVID-19 related location closures or employee terminations. If you have, or plan to lay off employees, you need to be acutely aware of the qualified retirement plan partial termination rules. Before you make a major business decision that could have a ripple effect, our team at RBT suggests that you reach out to your team of financial experts to get advice.  Remember, it’s always better to be proactive than reactive.

A retirement plan can suffer a partial termination if a substantial portion (usually 20% or more) of plan participants are terminated, or if a defined benefit plan stops or reduces future benefit accruals. If a partial termination occurs, participants must be immediately 100% vested in all accrued benefits. This means that employer contributions, including matching contributions and profit sharing contributions must become fully vested regardless of the vesting schedule in the plan document.  There may be other ramifications for defined benefit plans and in particular if you participate in a multi-employer defined benefit plan.

The IRS has prescribed a “turnover rate” formula to determine whether the reduction is significant. When calculating turnover to determine if a partial plan termination has been triggered, make sure you are using the proper calculation because the IRS is referring to participant turnover, not employee turnover.

Here’s an example to determine if a partial plan termination has been triggered:

Plan A has 300 participants at the beginning of the plan year.  Due to layoffs, 80 participants are terminated from employment during the year.  An additional 20 employees become eligible to participate during the plan year.  The turnover rate is 80 ÷ 320 or 25%.

In contrast, if we were to calculate simple employee turnover, you would use this formula:

Turnover rate = # of separations ÷ average # of employees.

The number of participants in a retirement plan is not always the same as the number of employees, so the turnover rates will not necessarily be the same.

RBT recommends that you to contact your third party administrator for guidance.  If your plan is chosen for audit, and it is determined that you did not comply with the regulations, the plan may lose its qualified status  which could result in the loss of the tax deduction that was taken resulting in significant tax consequences, penalties, and fines.  RBT is here to assist our clients at all times, but in particular during uncertain times, in a thoughtful, professional, and prompt manner.

In a recent Frequently Asked Question (FAQ), the IRS clarified some information that can be challenging to understand.  For more information, see www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers.

Click here to contact RBT CPA’s.

Click here to contact Janet Giannetta and learn more about how Visions Human Resource Services can help you.

Why Ongoing Independent Budget Reviews Offer Big Benefits for Municipal and County Governments in New York

Budget Review

As towns, villages, cities, and counties in New York deal with the economic fallout of COVID-19 in their own finances and on those of their taxpayers, it is a good time to consider an independent budget review to ensure that elected officials are doing all they can do to manage governmental funds properly.

Counties generally have budget departments, and often use independent reviews as a matter of course. In smaller municipalities, a municipal accountant or budget officer will generally ask department heads to submit budget requests, and then review those requests with them. The budget officer and the municipality’s chief fiscal officer must work together to create a realistic budget for the municipality’s governing board. This is intensive work in good times, and the pandemic has tightened finances across the board, creating new stresses and concerns.

New York State has projected an overall decline in sale tax revenues of 15 percent for April 2020 through March 2021, according to the State Comptroller’s Office. Some local municipalities will be hit even harder, especially with falling revenue from gasoline taxes due to lower prices at the pump. The New York Association of Counties has estimated that New York’s counties will see 22 percent drop in sales tax collections for the full year, a shortfall of $1.09 billion.

The Government Finance Officers Association notes that, particularly in difficult financial times, bringing in someone with technical expertise to review the municipality’s finances can provide reassurance to taxpayers that officials are acting responsibly.

An outside accountant can analyze the municipality’s operating results year-to-date, provide a clear-eyed perspective, and mediate the sorts of disagreements that inevitably arise among officials during budget negotiations.

At the same time, the reviewer can report any, identified deficiencies and inaccuracies in the municipality’s processes noted during his or her analysis and suggest solutions.

The independent accountant can review the budgeting practices of each department, and the assumptions on which planning is based. From there, the accountant can look at their projections of estimated revenues and appropriations and determine if they are reasonable.

For instance, town highway superintendents, who draw up their own budgets that require town board approval, may have disagreements with the town supervisor, and a neutral arbiter can help resolve the tension between what is needed to maintain roads and what the town taxpayers will bear overall.

In examining the overall budget process, the reviewer can look at the capital plan, and what expenditures are planned for the coming year or so; and the reviewer can look at debt projections. He or she can assess the fund balance plan and provide advice to officials on what they should use from those reserves

During the budget review process, the independent reviewer will meet with the members of the governing body to present comments, recommendations and findings and answer the officials’ questions. At the end of the process, the municipality receives a formal report.

An independent budget review can provide local government officials with assurances that they have done everything properly and responsibly for the taxpayers. The independent review also provides value and confidence for taxpayers, as they know someone with expertise in government accounting has provided input, and that there is a reasonable basis upon which their property taxes are determined.

How Improvement Districts Help Drive Needed Revenue for Municipal and County Governments in New York

Woodbury Commons

Municipal governments in New York looking for ways to generate revenue can consider improvement districts, such as business improvement districts, to fund needed services in high-demand areas without imposing an undue burden on other taxpayers.

New York State enacted legislation allowing for the creation of business improvement districts (“BIDs”) in 1981. In general, improvement districts are created to provide services to a specified area, while having the property owners within that area who would benefit from those services pay for them.

BIDs are formed and governed by municipal officials and community members and funded through an added tax on commercial property owners within the borders. In exchange for those taxes, these BIDs offer services including street and sidewalk clean-up and maintenance, with the aid of volunteers; marketing of the district, and special events that draw in potential customers and contribute to the life of the district and surrounding community.

BIDs may also drive revitalization efforts with the municipality, bringing to fruition improvements to sidewalks, roadways, lighting, and other downtown design elements.

In practice, business improvement districts can be narrowly tailored for a specific service, or a broader entity that oversees security, sanitation, land- and streetscaping and marketing for business.

Examples of expansive business improvement districts are found in the City of Middletown, where the Downtown Middletown Business Improvement District encompasses the heart of the commercial district near City Hall; and in the Town of Poughkeepsie, where the Arlington Business Improvement District centers on Raymond Avenue and borders on Vassar College.

An example of a more focused BID is one created by the Town of Woodbury for the Woodbury Common Premium Outlets, the 250-plus-store shopping center that draws 13 million visitors annually from around the globe. The Woodbury BID was created specifically to fund police services required by the outlets.

The Town of Woodbury, with an estimated 2019 population of 11,370, employs 21 full-time and two part-time police officers, and four full-time civilian dispatchers.  Although the town has little other crime of any significance, according to statistics from the town and from the state Division of Criminal Justice Services, the department handles hundreds of larceny cases and more than 1,500 motor vehicle accidents annually.

Creating a business improvement district requires a public hearing. The district must be clearly defined, and its enhanced services will be funded via a special assessment on each property within its boundaries. Because the districts have higher demands for the services, the tax is essentially a premium

Although the BID will be incorporated as a non-profit, the assessment will be levied by the municipality along with property taxes, and the taxing district remains under the control of the local government. According to the Government Finance Officers Association, this has the added benefit of maintaining accountability to the public for the improvement district’s spending.

Some BIDs, including Middletown and Arlington were formed in part to revive urban downtowns that suffered in previous decades when malls and chain stores drew customers out of traditional shopping districts.

In areas where there may be separate special districts for water, sewer, lighting etc., a BID can also consolidate these other entities and simplify the structure of government. In cases of municipal mergers, BIDs can also play a role. For example, when towns and villages discuss mergers, concerns by village residents about reductions in services often present a stumbling block. In such a case, the solution could be a business improvement district that follows the village outline. That would allow a special assessment for dedicated police coverage for the former village, and the town could take over water and sewer as special districts.

Local governments need revenues to provide enhanced services to support the economic health and stability of commercial areas. Business improvement districts present a way to do that by charging a special assessment to the commercial properties that will directly benefit from those services, without unfairly burdening other taxpayers.

Municipalities Can Build Financial Resilience in the COVID-19 Era and Beyond

Financial Strategy

The COVID-19 pandemic and the accompanying shutdown have brought financial challenges to municipal governments throughout New York State.

Sales tax revenues declined steeply across the state in April and May compared to 2019, and state aid will be cut or delayed. Unemployment rates may affect residents’ ability to pay property taxes, creating further worries about revenue as we head toward the fall budget season.

There are strategies that county, city, town and village governments can undertake to mitigate the effects of the crisis: finding alternate ways to generate revenue and to cut costs to address short-term needs in the next 12 to 18 months; and making the budgeting process and financial practices more resilient to address long-term goals for the next three to five years.

The starting point can be a two-part analysis: First, a short-term analysis of cash flow to ensure the municipality can keep running in the next few months. Then a long-term forecast can determine if an economic upturn will resolve issues, or if there are deeper problems that need repair.

The COVID-19 pandemic has caused immediate fiscal pain around the state.

A survey by the Association of Towns of the State of New York (AOT) found that in the month of March, towns in New York lost roughly $215 million in revenue between drops in sales tax, mortgage recording taxes, license and permit fees and justice court fines. AOT noted in its survey findings that businesses in the state were operating as normal for the first half of March. Sales tax made up the largest portion of the loss, according AOT.

The New York State Comptroller’s Office has reported that April sales tax revenues in New York’s counties and cities dropped by 24.4 percent compared to April 2019. May’s sales tax collections fell 32.2 percent compared to May 2019.

State tax receipts for May fell by 19.7 percent compared to May 2019, a drop of $766.9 million, the Comptroller reported. Personal income tax withholding revenues dropped 9 percent in May compared to May 2019.

In bad times, the Government Finance Officers Association recommends taking a financial diagnostic review of operations and the budgeting process to provide officials of a financially distressed municipality with an in-depth look at their budgeting and fiscal practices. This helps to assess financial health and to identify areas for strategic cost savings and alternative sources of revenues.

In such a climate, it is crucial that local governments find a way to create what the GFOA calls “culture of frugality,” and find responsible, cost-effective solutions

Short-term measures, meant to affect 12 to 18 months out, are cost-cutting and alternate-revenue strategies, such as dipping into reserves to bridge a budget gap. With each measure, a government must consider whether the move will be a sound long-term strategy, or if a cut today could lead to increased costs down the line.

A number of school districts in the mid Hudson region used a variety of these tactics to get through the 2020-2021 school budget season, avoiding deeper cuts to teaching staff or academic programs by leaving jobs unfilled after employee retirements, and using fund balance to offset tax levy increases to spare taxpayers and keep the budget under the statutory tax cap.

Longer-term planning for recovery after crisis requires a data-based approach that addresses root causes of financial stress. This means requires studying the economic and social environment of a municipality, analyzing budgeting processes and reforms, and creating an operational plan.

Now is the time for government leaders to look for ways to mitigate the crisis, to build resilience through 2020 and beyond.

Over the next several articles, we will discuss these approaches in more depth, with recommendations for concrete steps that local governments can take.

Breaking Down SBA Question 49

Paycheck Protection Program Forgiveness

After hearing concerns from small business owners across the country about the restrictions of the PPP, lawmakers passed a bipartisan bill called the Paycheck Protection Program Flexibility Act of 2020 to make the PPP easier to use and get forgiven. Still, a lot of confusion remains surrounding the terms of PPP loans. We will focus on SBA question 49 of SBA’s FAQ list to get to the root of what to do:

Question: What is the maturity date of a PPP loan?

New PPP loans approved on or after June 5th automatically have a loan length of five years. The PPP loan program is widely recognized for its forgivable nature if used for payroll, rent and utilities. Still, for a significant portion of borrowers, not all of the loan will be forgiven. The unforgiven portion will be converted to an SBA loan at a rate of 1%.

If a PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity. Existing loans can have their length extended from two years to five years, if the borrower and lender mutually agree to it. But what exactly does that mean for business owners who fall in this category, and how does one go about extending their existing loan?

The answer as it turns out, is not quite as clear-cut as you would hope. Lenders nationwide from longtime trusted local credit unions, to big bank chains are currently waiting on government rulings to learn how to proceed. There have been talks of complete blanket loan forgiveness roll-outs for any business owner who received up to $150,000 in PPP loans, but no concrete decisions have been made just yet. Lenders, like the majority of financial heavyweights, are taking a wait-and-see approach for upcoming changes to PPP terms as well as the forgiveness applications that are starting to roll in.

Even before the Covid-19 crisis, small business owners have long known the challenge of getting access to cheap capital. Extending two-year loans to five-year loans could be a helpful business strategy for businesses facing continued COVID-19 induced problems as we approach the tail end of 2020 and head into 2021.

To illustrate the appeal of extending a PPP loan, consider the following scenario. A small business applied for and received a $200,000 PPP loan. By using the loan primarily for payroll, utilities and rent, the business owner was able to have 75% of the loan forgiven, leaving $50,000 to be paid back to the SBA.

At 1%, a two-year loan of $50,000 results in a monthly payment to the SBA of $2,105.  The same loan over a five-year period is $855 a month.

For many small businesses, $1,250 a month can make a big savings difference. This crisis has shed light on how many small businesses operate on a small margin, so choosing the longer loan period can create better options for a sustainable business structure.

As lenders wait for further clarification from the SBA, many recommend business owners to be in regular communication with their lenders for important policy changes or updates. Depending on the bank you are working with, the likely scenario is that once you give them a call, the representative will refer you to your bank’s Business Banking Team to review your unique circumstance with a Loan Specialist. If your PPP loan falls in the two-year loan length category, the team may help you to complete reauthorization forms so your lender can approve the loan extension. Currently, there truly is no one-size-fits-all answer that can cover businesses across industries, which is what makes this issue all the more complex.

While some questions remain unanswered, it is important to do everything in your power to protect your business against future vulnerabilities and to stay vigilant to the challenges that lie ahead. The entire professional staff at RBT remains committed to helping our clients navigate these challenging times. If you have any questions, or would just like to talk about the financial future of your business, we are here for you. Please do not hesitate to reach out and connect to one of our team members.

Best practices for developing municipal and county fund balance policy and plans in New York

Balancing Funds

Developing and implementing sound municipal fund balance policy is crucial to any local government’s ability to plan for the ebb and flow of expenditures and revenue and to deal with unexpected events or expenses, even in the best of times.

A policy that sets out the amount of funds a municipality keeps in reserve, how those funds may be used, and how they will be replenished is a planning tool, helping to guide daily operations as well as longer-term strategies.

There are five categories of fund balance. In order of most restricted to least restricted in terms of use, they are non-spendable, restricted, committed, assigned and unassigned fund balance. The latter three categories comprise what is known as unrestricted fund balance according to Office of the State Comptroller guidance. Under New York State law, counties, villages, towns and fire districts may carry over “a reasonable amount” of unappropriated, unreserved fund balance from one budget year to the next. A municipality must follow proper procedures and legal requirements to transfer funds between these classifications.

Municipal revenues ebb and flow as a matter of course. In Orange and Dutchess counties, for example, most municipalities collect their property taxes, the main source of revenue, early in the calendar year. Sales tax and state aid supplement are other major sources of funds. However, the government body must have enough cash on hand to cover payroll and bills throughout the year, even in the months when revenues are not coming in. That requires a cash flow plan for the entire upcoming year.

Since property taxes are not received at the very beginning of the year, the cash flow plan should contain a provision to cover this temporary shortfall. The standard, according to the New York State Governmental Finance Officers Association, is to maintain enough unrestricted fund balance in the general fund to cover at least two to three months of regular general fund operating revenues or regular general fund operating expenditures.

In addition, government officials should assess their municipality’s unique circumstances and risks to determine what level is appropriate for a sound fund balance policy. If a town or village is vulnerable to natural disaster such as flooding which could generate unexpected expenses, or to an unpredictable revenue source such as state aid that could be cut, officials may need to keep higher levels of unrestricted fund balance in reserve.

A sound fund balance policy provides a framework to guide current budgetary decisions as well as those for the long-term. For example, a municipality’s capital plan should inform officials and taxpayers what needs to be done over the next five years, and how it will be funded. Planning major expenditures in advance allows a government to save funds, minimizing the need to borrow.

Fire districts often set up equipment or building reserves and budget transfers to those reserves each year, to allow them to save for capital purchases such as fire trucks, which can cost from $600,000 for a new engine to $1.2 million for a new aerial ladder truck.

There are consequences to insufficient fund balance. When a municipality with limited reserves finds itself in the throes of an emergency, officials may have to make painful budget cuts that deprive residents of needed services, or they may have to raise property taxes. A municipality may have to undertake short-term borrowings, which can raise costs and hurt its bond rating.

If a municipality carries too much fund balance, it runs the risk of angering taxpayers, who will perceive this as paying extra taxes now to benefit the future.

So what makes good fund balance policy?

According to the New York State Comptroller’s Office, an effective policy is written, formally adopted by the governing body with input from relevant officials, such as the municipality’s financial officer. The policy should be used to develop long-term plans, and should address how surplus balances should be used, as well as how and when to replenish fund balance that has been spent.

A sound fund balance policy provides a cushion against unexpected expenditures and revenue shortfalls, and ensures that government operations can continue even in difficult times.

Contact RBT CPAs, LLP with any questions you may have.

Municipal retirement incentives for employees in New York: What your local government needs to know

Retirement Incentives

Municipal retirement incentives can be a solid strategy for a local government that seeks to generate revenues and cut expenses, but using this option requires research and planning to determine if it is right solution for financial circumstances.

Municipal retirement and separation incentives are making the news as county executives across the Mid Hudson region seek to trim budgets. In the wake of sales tax losses and delayed state aid during the COVID-19 crisis and shutdown, every dollar counts.

As an example, in late June, Dutchess County announced retirement incentives for employees who meet state pension system requirements, offering a bump to the county share of retiree health insurance premiums and either 10 years of fully covered vision and dental or a $10,000 incentive payment. Dutchess is also offering the option of a $20,000 lump-sum incentive to employees who retire, as well as to employees who opt for voluntary separation.

Dutchess expects the incentives to save the county between $8 million and $12 million.

The first step in determining whether a retirement incentive is right for a local municipality is to perform an analysis of your employee demographics. Once officials determine who is reaching or is at retirement age, they must consider the job and duties of the employees who might take an incentive. Is this a job where the employer will need to fill the vacancy, or it is a position that can be eliminated?

Whether a job’s duties are essential or non-essential factors into the decision. Police officers who retire, for example, may need to be replaced to maintain public safety. For other positions, departments may be able to combine duties to accommodate trimmed staffing, or find ways to automate services, such as online bill paying.

The analysis must be realistic and consider which retirees’ or open positions must be filled to continue providing needed services to taxpayers.

Local governments looking to offer incentives must also examine labor contracts and work out details with unions if bargaining-unit positions are affected.

Although retirement incentives are thought of as a near-term money-saving measure, their effects make them a longer-term measure.

Once officials have analyzed the workforce and weighed all of the information, they can then extrapolate potential savings versus the cost of incentives that will entice a sufficient number of employees to accept the offer.

Savings depends on the employee’s salary and when he or she accepts the incentive. For example, if workers retire effective July 1, the municipality will still have half of their annual salaries and benefits in the budget, helping to offset the cost of the incentives. Offering an incentive earlier in the year maximizes savings.

Officials must be sure that the savings created by the retirements or separations exceed the funds paid out to secure them.

The most obvious incentive is a cash payout. Orange County, for example, offered voluntary separation incentives of $10,000 for employees with 10-20 years of service, $12,500 for those with 20-30 years of service, and $15,000 for workers with more than 30 years. Orange coupled its separation incentives with a two-month voluntary layoff program that allows workers to collect unemployment.

Municipalities can also offer perks such as bonus payouts of unused sick or leave time, continuation of benefits, or reduced contributions towards benefits.

To offer incentives, the municipality must spend money. Optimally, a municipality will have cash savings from unexpended salaries and/or sufficient fund balance to pay out incentives. Otherwise, officials must take a hard look at the current budget, to look for efficiencies.

In determining the best course for using municipal employee retirement incentives, local officials must take a larger view of personnel and government functions. That assessment will determine how a government can most economically and efficiently provide the services constituents need and expect.

Safe Manufacturing During the COVID-19 Crisis

The coronavirus (COVID-19) pandemic has forced American businesses to adapt quickly to a radically new economic and operating landscape. If your company sells, manufactures, delivers, distributes or otherwise facilitates goods considered “essential” you may need to operate at full (or overtime) capacity. On the other hand, manufacturers whose goods aren’t deemed essential may be forced to idle their machines and close their doors indefinitely. (In many cases, state guidelines specify which businesses are essential and which ones aren’t.)

Both situations are challenging. But if you’re up and operating, here are four considerations to help you do so safely and productively:

1. Keep Workers Safe

The health and safety of workers has always been a priority for manufacturers. Now you must contend with the threat of COVID-19. If some of your employees can work from home, enable them to do so successfully by ensuring they have the technology and other resources they need. Even as states “open for business” again, consider keeping remote workers at home, if possible, until COVID-19 treatments or a vaccine are available.

For workers who must be on-site, consider scheduling skeleton crews in shifts and try to keep the same workers on individual crews to limit potential exposure. Also limit the number of managers working at any one time in production areas. Even if you normally operate nine to five, the transition to 24-hour operations may be easier than you think. Exercising flexibility helps lower the risk that the virus might spread. And if an employee does become sick, fewer coworkers will be required to self-quarantine.

Positive cases of COVID-19 exposure should be treated seriously. In addition to quarantining workers, you must thoroughly clean all production and office areas before allowing operations to resume.

2. Embrace Innovation

Doing things the way you always have may not be the best course right now. Instead, be ready to adapt and innovate whenever the situation calls for a different approach. For example, most manufacturing workers don’t work from home. But 3D printers may make it possible for some employees to produce goods while social distancing.

Or consider how your company might repurpose goods to meet new demands. As has been well-publicized, some companies are redeploying resources to produce ventilators and other needed medical equipment. In many cases, manufacturers may find it relatively easy to pivot to new production modes and goals. For instance, some distilleries are converting alcoholic beverages into disinfectants. Paper producers might ramp up production to meet increased demand for shipping boxes. And manufacturers already producing cardboard could redesign templates to make more “to-go” boxes for restaurants that have been forced to close dining areas.

Be sure you heed federal and state government mandates. Some companies may be asked to modify their operations so they can produce in-demand medical or cleaning products. Even if you aren’t required to change your operations, look for opportunities to address the current situation. Slight alterations could mean the difference between your products being deemed essential vs. non-essential. If you’re a link in an important supply chain, you may be able to make the case for continuing operations.

3. Plan for Financial Challenges

Your factory may be busy now, but there’s no guarantee that will be true in a few months. The financial ramifications of COVID-19 could be long-lived — and dire — for many businesses. Plan so that work slow-downs don’t sneak up on you.

Federal and state authorities have introduced various tax breaks, particularly for companies that keep workers on the payroll. The Families First Coronavirus Response Act made certain employers eligible for tax credits so long as they provide paid sick leave to COVID-19-positive employees or workers who have to stay home to care for sick family members.

The subsequent Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized several provisions, including:

  • Delays for payroll tax obligations,
  • An employee retention credit,
  • Favorable tax provisions for businesses incurring losses, and
  • Expanded unemployment benefits for workers.

The CARES Act also launched the massive Paycheck Protection Program (PPP) that offers qualified businesses forgivable loans and other forms of relief for keeping employees on the payroll. After the available money ran out, Congress approved a second round of funding for the PPP in late April.

State and local support levels vary depending on the municipality. For example, your state may have removed some restrictions for businesses producing essential products.

4. Get Professional Advice

Your manufacturing management team doesn’t have to tackle the many challenges of the COVID-19 crisis alone. We have up-to-date information on federal and state benefits available to manufacturers. And we can help you navigate the lending landscape. For example, we can help identify appropriate lenders and prepare the calculations and statements required to apply for PPP loans. Don’t hesitate to contact us.