Delaware enacted legislation to create a Paid Family and Medical Leave program. Benefits (claims) do not start until January 1, 2026, however, employer contributions begin January 1, 2025. Enrollment is mandatory for certain employers.
The following is a general guideline of the various time frames, coverages and benefits:
The program establishes up to four different lines of coverage.
Parental Leave – Bonding with a new child during the first year after birth, adoption or placement (12 Weeks in a 12-month period*)
Medical Leave – “Short-term Disability” – Caring for one’s own serious health condition/emergency. (Six week in a 24-month period*)
Family Caregiving – Caring for a family member with a serious health condition. (Six weeks in a 24-month period*)
Qualified Exigency Leave – Handling matters resulting from a qualified military exigency. (Six weeks in a 24-month period*)
*Across all lines of coverage, there is a maximum of 12 weeks in a 12-month period.
Who does it impact?
Employers with 9 or fewer employees – Not required to enroll, but can voluntarily enroll to provide benefits to employees
Employers with 10 – 24 employees – Required to offer Parental Leave
Employers with 25+ employees – Required to offer all lines of coverage
Important Dates:
Delaware registration portal is now open
Employers with 9 or fewer employees are not required to register unless voluntarily opting in.
December 1, 2024 – Deadline to apply for exemption with a preexisting plan
December 1, 2024 – Deadline to voluntarily opt in
January 1, 2025 – Employer contributions begin
January 1, 2026 – Employees can begin to file claims
Cost to employers:
Parental Leave Only – 0.32% of wages (Fica wages) – $160 per employee with a salary of $50,000/year
All lines of coverage are 0.8% of wages (FICA wages) – $400 per employee with a salary of $50,000/year
Employer can (not required) make the employee responsible for up to 50% of the cost through payroll deductions
Benefits:
Claims start January 1, 2026
Benefit is 80% of wages
Maximum of $900/week
Minimum of $100/week
General Notes
Employers with 9 or fewer employees may opt in voluntarily. This is a fairly inexpensive fringe benefit.
A private benefit plan is allowed but must receive approval by opting out prior to December 1, 2024.
Employers covered by the mandate should create an account via the following link: Click here
If we will be assisting you with payroll, you can give Stayton, Dickens & Webster, LLP administrative access as a TPA (Third Party Administrator). Our TPA Account number is #6000655
DELAWARE EARNS – State Mandated Retirement Savings Program
Effective July 1, 2024, any Delaware employer with five or more employees is required to enroll in Delaware’s new retirement savings program called “Delaware Earns” (Expanding Access for Retirement and Necessary Savings). The program is not a retirement plan as defined by IRS standards but more of an IRA contribution for employees through payroll deductions.
Five or more employees is “loosely” defined. According to Delaware Earns, if you employ five different individuals throughout the course of the tax year, you are deemed to have five employees and therefore subject to this new requirement. Stated differently, if you issue five W2s at year end, you are subject to the new requirement. All employers with five or more employees must enroll. However, if any employer already has a qualified retirement such as a 401K, Simple IRA, or other qualified retirement plan, they may file for an exemption. Employers with less than five employees are not required to register.
Key Program Highlights:
No cost to the employer.
Employers are not allowed to make matching contributions on behalf of employees.
Employees are automatically enrolled in the program using a 5% deferral rate but are allowed to lower their deferral rate to as low as 1% or opt out entirely.
The program utilizes a ROTH IRA type account by default.
Maximum Employee deferral for 2024 is $7,000 with an additional $1,000 catchup contribution allowed if they are over age 50.
Employers must register by October 15, 2024.
We have summarized the necessary steps based on your business’s individual circumstances:
If your business has four or fewer employees:
We recommend calling 855-934-3701 to confirm your exemption in their system.
If your business has five or more employees and you have a qualified retirement plan already in place:
We recommend calling 855-934-3701 to confirm your exemption in their system or;
If you received an access code, you can login on the website to confirm your exemption.
If your business has five or more employees and you do NOT have a qualified retirement plan in place:
You need to register your business with Delaware Earns by October 15, 2024. We recommend starting this process right away.
You will need your access code to do this. If you have not been provided with an access code, you can look up your access code on earnsdelaware.com
You will need to enter your payroll information, company bank information, and employee information.
Employees will receive communication from Delaware Earns giving them 30 days to opt out. If they do not opt out, the employer will start withholding contributions on their behalf.
You will need to administer the program as part of normal payroll – Details are available on earnsdelaware.com
The above summary is designed to give you a quick, easy to read, general understanding of this new state-mandated initiative. We recommend that you start this process sooner, rather than later, as many employers have experienced difficulty and delays in obtaining their access codes. Employers who fail to comply with the mandate may face penalties. We encourage you to visit earnsdelaware.com for additional information.
On March 29, 2022, the United States House of Representatives passed the “Securing a Strong Retirement Act of 2022” (SSRA) – better known as “SECURE Act 2.0” with a vote of 414 to 5 – almost a unanimous decision. This proposed legislation builds on prior legislation passed in The Secure Act of 2019. This new proposed legislation is expected to become law before the end of 2022 after passing the Senate and being signed into law by President Biden. The Senate just released their revisions to the House’s legislation on May 26th.
This Act and most recent Senate revision provide the following:
Auto-Enrollment – The bill would require all new (not existing plans which are exempt from these provisions) 401(k) plans to automatically enroll employees and would require deferrals between 3% to 10% of compensation. The bill does allow for participants to opt out of the plan. However, among plans that already require automatic enrollment, more than 90% of the employees stayed enrolled. Businesses with 10 or fewer employees or companies who have only been in business for less than three years would be excluded from this mandate. Plans implemented prior to the Act becoming law, will be exempt from the auto-enrollment requirement.
Tax Credit for Small Business (up to 50 employees) who start a retirement plan – Increases the three-year retirement plan start-up credit from 50% of costs to 100% with a $5,000 annual cap.
Matching Student Loan Payments – Employers who provide a “match” for employees can designate the match to pay down their student loan debt. This is allowed even if the employee does not defer any funds into the retirement plan. Approximately 3.4 million people who cannot currently save for retirement due to their student loan obligations can begin saving if for nothing else to reduce their outstanding loan obligations.
Matching Contributions – The employee can designate that the company matching contribution be a Roth contribution.
Delays the Require Minimum Distributions – The Secure Act of 2019 provided that the age for required minimum distributions is to begin at age 72 (not the 70-1/2 original age). This new provision increases the starting age to 73 on 1/1/23, age 74 on 1/1/2030 and age 75 on 1/1/2033. The Senate version would waive required minimum distributions for individuals with less than $100,000 in their retirement savings. The penalty for not taking the required minimum distribution is also reduced to 25% from the current 50%.
Part-Time Employees provided quicker access – Part-time employees will be allowed to participate after completing 500 hours per year for a minimum of 2 years. The original measurement period was 3 years.
Catch-Up Provisions – The House bill increases the amount of the contributions for catch-up provisions to $10,000 (up from $6,500) for 401(k) plans for individuals aged 62, 63, and 64. Employees in SIMPLE plans would be allowed $5,000 in catch-up contributions (up from the current $3,000). The Senate revision allows the increased catch-up provision to begin at age 60 and does not limit it to the ages of 62 through 64.
Catch-up Provisions Must be Post Tax – Any catch-up provision must go into a Roth account which requires the tax to be paid up front instead of at retirement. This will allow the government to receive tax now instead of later. However, a trade-off in favor of the taxpayer will allow any income generated from these funds to be excluded from future income tax.
Qualified Charitable Distributions – Indexes the annual amount for withdrawals to charity from your IRA for RMD purposes (currently $100,000).
Pension Lost and Found – A National online database will be established to help participants track down lost retirement accounts.
If you have further questions or would like to discuss how this new legislation will impact you or your business, please give us a call.
For many taxpayers, the increased standard deduction has all but eliminated any tax benefit once derived from charitable contributions. Considering this, one strategy is to utilize Qualified Charitable Distributions or QCDs.
If you are age 70.5 (70 and one-half) or older by the end of 2022, you can make a distribution to charity directly from your traditional IRA(s). Directly is an important part of this process; The contribution must go directly from your IRA. In other words, the money cannot hit your “hands” or bank account. Your IRA fiduciary should create a check payable to the charity of your choice.
This has many benefits! First, the charitable distribution is not included in your income (Adjusted Gross Income or AGI). Keeping your AGI lower has many benefits such as the taxability of social security, Medicare Part B premiums, the ability to deduct rental losses, and many others. A QCD will also count towards your required minimum distribution (RMD) for the year!
Now, since you were not required to include the distribution in income, you cannot take a charitable deduction for that contribution. However, since many individuals cannot itemize anyway, you have essentially created a charitable deduction by not including the withdraw in income!
Things to note and keep in mind:
At present, you are limited to an annual QCD of $100,000. A spouse can also make use of the $100,000 limit.
You will need to keep good records for each QCD executed. At year end, the tax document sent to you will include all distributions. Your tax preparer will “net” the qualified charitable distributions against the gross amount.
A QCD will count towards your required minimum distribution (RMD) for the year.
Any amount donated above your RMD does not count towards a future year’s RMD.
The funds must go directly to the charity. Any funds distributed to you and then sent to charity, will not qualify as a QCD.
The charity must be a 501(c)(3) to qualify. (I.e. No private foundations or donor advised funds)
If you still have questions, we would be happy to setup a time to discuss this further.
As the IRS continues to experience back logs, we are recommending that all income tax payments be made electronically. Many of our clients are experiencing issues with uncleared checks and even lost payments when utilizing paper checks. The process to pay your balance due or estimated tax payments electronically is very easy. We have outlined the steps below.
Federal Payments – Have a recent tax return as well as your routing/account number available and use the following link:
Under the first dropdown box “Reason for Payment” select “Balance Due” OR “Estimated Tax Payment” depending on the type of payment being made.
Under Apply Payment To, a balance due should generally be applied to “Income Tax – Form 1040” and an estimated tax payment should be applied to “1040ES”.
Under tax period, make sure the correct tax year is selected. (Hint – A balance due is probably the prior year and estimated tax payments are the current year)
Click on “Continue”.
Step 2 will verify your identify. This is where your prior return will be helpful – Fill in the required information and click “Continue”.
Step 3 will require you to enter your payment amount as well as your routing and account number.
Step 4 & 5 Will review and verify the information entered. We recommend printing the confirmation number when complete.
If you applied for and received a PPP loan, the original bill created by Congress inadvertently made the proceeds taxable. GOOD NEWS – The new bill recently signed into law, called the Consolidated Appropriations Act, corrected the original bill by clarifying that a forgiven PPP loan will NOT be counted as taxable income.
The new bill also created a simplified application for forgiveness. If your PPP loan amount was under $150,000, a new form will be available that allows you to self certify that you have met all of the requirements necessary for full forgiveness. You, the loan recipient, are still responsible for all of the supporting documents in case of an audit, but you will not be required to submit that documentation at the time of application. Application for forgiveness must be submitted within 10 months of the end of your covered period. Please note – The application is filed with your lender, not as part of your tax return.
Under the original bill, PPP loan forgiveness was required to be reduced by the amount of any EIDL grant received. In other words, you would have been required to repay your PPP loan to the extent of any EIDL grant received, even if you qualify for full forgiveness. The new bill removed that requirement so that you could receive full forgiveness even if you received an EIDL grant. If you already applied for forgiveness and your forgiveness amount was reduced by the amount of an EIDL grant you received, please contact your lender immediately to discuss how to go about amending your application.
In addition, due to a retroactive change by the new bill, employers who received an original PPP loan can now also apply for the employee retention credit. To be eligible for the 2020 employee retention credit, the employer must:
Be able to show that their gross revenue dropped by at least 20% during any calendar quarter in 2020 compared to the same calendar quarter in 2019 or;
Be an employer whose business is fully or partially suspended by a government order related to COVID-19 during the calendar quarter.
For 2020, this credit can provide up to $5,000 per employee. Please note – This credit must be claimed on form 941 as part of your quarterly payroll filings. In addition, if you feel you qualify for this credit, it is important to specifically allocate which expenses you claim for PPP Loan forgiveness and which expenses you claim for the employee retention credit. You CANNOT use the same expense for both purposes.
Lastly, the new bill also created a new round of funding for initial and second PPP loans. Individuals who received a PPP loan under the original bill are eligible to apply for second loan providing they meet all of the following criteria.
Be able to show that their business’s gross receipts dropped by at least 25% during any calendar quarter in 2020 as compared to the same quarter in 2019. Alternatively, as long as your total income for 2020 is down 25% when compared to 2019, you will qualify.
Employ no more than 300 employees per physical location.
Have already used 100% of their initial PPP loan.
If you need assistance applying for a PPP loan, PPP loan forgiveness or think you may qualify for the employee retention credit and would like our help, please contact us immediately to setup an appointment.
The Coronavirus Aid, Relief, and Economic Security (CARES) act passed in late March included a provision to provide unemployment insurance to workers who are not ordinarily eligible for unemployment benefits. This includes self-employment individuals such as sole proprietors, single member LLCS, partners in a partnership and multi-member LLCs. Since the bills passing, most states have been scrambling to get the new provision implemented. Starting today, May 11, 2020, the State of Delaware will begin accepting applications from those workers. If you are one of those listed individuals and have been affected, you should consider applying. The following link can provide you with additional details on how the application process will work and how to apply:
The Payroll Protection Program is a loan and is expected to be repaid at 1% interest over a 2-year term.
A portion of the loan may be forgiven provided certain requirements are met. We want to make sure that you understand not all borrowers will qualify for this loan forgiveness. Before accepting, you should not assume that you will qualify for loan forgiveness and will, therefore, be required to repay the entire amount.
WARNING – our initial research indicates that the loan forgiveness requirements may be more difficult to qualify for and prove than originally understood.
We have recently received notification of acceptance from several clients regarding the Payroll Protection Program loans through the Small Business Administration and their local lenders. We would like to extend our concern about acceptance and the ultimate forgiveness of these loan proceeds.
From our initial research, we have determined that there are several requirements that must be met in order for the loan to be forgiven. First, in order to qualify for forgiveness, 75% of the loan amount must be spent on Payroll (not subcontractors) in the 8 weeks that follow the deposit of the loan proceeds. The remaining 25% must be spent on rent, mortgage interest and utilities. Assuming the first test is met, there are two additional tests that could reduce or eliminate the forgiveness of your loan.
You must maintain the number of employees on your payroll. Hopefully, there will be substantive guidance on the calculation of employees. Currently, the wording indicates “full-time equivalent employees when compared to a prior period”. However, there is no link or support for this requirement on the SBA website or other authoritative sources that we can locate.
You must maintain at least 75% of total salary when compared to a recent period. This test will be applied for each individual employee in the 8-week period of the loan. If the employee’s pay over the 8 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced by the difference between their current pay and 75% of the original pay.
We understand that you probably have questions as to whether you qualify for forgiveness. At this time, we encourage you to contact your lender for specific details for determination. At this time, we cannot guarantee or express an opinion as to whether the loan will be forgiven. Please proceed with caution.
Due to the COVID-19 health crisis, we have received a notification from the Delaware State Housing Authority regarding a Housing Assistance Program for Delawareans who are facing financial hardships. Households are eligible for up to $1,500 is assistance, with payments made directly to land or property owners for rent or utility company payments.
To be eligible, you must:
Reside in Delaware
Maximum household income at or below 80% of the Area Median Income (AMI) for the county in which you reside. (You will find the income levels on the website listed below)
Provide documentation showing an impact on the employment or income beginning March 10, 2020 or later that is attributed to the COVID-19 pandemic. This includes layoff, reduced work hours, or needing to take unpaid leave due to childcare or other issues arising as a result of the health crisis.
The following is the website with more information and the application for applying.
The Coronavirus Aid, Relief and Economic Security (CARES) Act was just signed into law on March 27, 2020. It is a gigantic economic stimulus package with many provisions that will affect you financially. Some of the key points are as follows:
Recovery rebates for individuals – To help individuals stay afloat during the time of economic uncertainty, the government will send up to $1,200 payments for eligible taxpayers and $2,400 for married couples filing joint returns. An additional $500 payment will be sent to taxpayers for each qualifying child dependent under age 17. These amounts will phase out based on your adjusted gross income over $75,000 (singles or married filing separately), $122,500 (head of household), and $150,000 (joint). For singles, if your income is greater than $98,000, you will not be eligible for this payment. For married filing jointly, the payment will be reduced to zero if you income exceeds $198,000. We are forwarding another announcement with more details on the specifics of this rebate.
Waiver of 10% early distribution penalty (no waiver of tax, just penalty). The additional 10% tax on early distributions from IRAs and defined contribution plans (such as 401(k) plans) is waived for distributions made between January 1 and December 31, 2020 by a person who (or whose family) is infected with the Coronavirus or who is economically harmed by the Coronavirus. Penalty-free distributions are limited to $100,000, and may, subject to guidelines, be re-contributed to the plan or IRA. Income arising from the distribution and the corresponding tax is spread out over three years unless the employee elects to turn down the spread out.
Waiver of required distribution rules. Required minimum distributions that otherwise would have to be made in 2020 from defined contribution plans (such as 401(k) plans) and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70-1/2 in 2019.
Charitable deduction liberalizations. The CARES Act makes significant liberalizations to the rules governing charitable deductions:
Individuals will be able to claim a $300 above-the-line deduction for cash contributions made, generally, to public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers claiming the standard deduction.
The limitation on charitable deductions for individuals that is generally 60% of modified adjusted gross income doesn’t apply to cash contributions made to public charities in 2020. Instead, an individual’s qualifying contributions, reduced by other contributions can be as much as 100% of the contribution base. No connection between the contributions and COVID-19 activities is required.