by Loren Elms | Employee Benefits
The phrase catches your attention doesn’t it? After all, who doesn’t want free money? Well many employers actually do offer free money—through a retirement plan that matches employee contributions dollar for dollar up to a certain percentage. Simply enroll in your company 401(k) plan and contribute 3% to 5% of your pay, and you could get what amounts to an instant 3% to 5% raise!
Yet many employees are leaving this free money on the table. According to a survey by Hewitt Associates, 22% of 401(k) participants do not contribute enough to get the maximum company match.
Haven’t started yet? Servant HR administers many different retirement plans for our clients. Look through your employee handbook or talk to your benefits administrator to see what plan your company offers. Find out when you can participate in your employer’s plan, and follow these two simple steps.
1) Join as soon as you are eligible.
Ask for a copy of the plan booklet (called the Summary Plan Description, or SPD) to learn your plan’s rules and requirements. Retirement plan rules vary. Some plans require that employees be at least 21 years of age and have a year of service with the company before they can participate. Even part time employees can sometimes be eligible if they work a certain number of hours per year.
2) Contribute as much as you are able.
If you think you can’t afford to have much taken out of your paycheck, consider starting with a small percentage and increasing it by just 1% or 2% each year. Or, you could plan to increase your salary deferral any time your salary increases. Your contributions will be deducted from your salary pre-tax, and your investment will continue to grow, tax-deferred, until you take it out. To make changes to your contributions, request the proper form from your plan administrator. You might also have online access which allows you to make deferral changes through your plan’s website (though some plans only allow deferral percentages to be changed at certain points throughout the year).
Don’t worry. Any money that is deducted from your paycheck for your 401(k) plan, and any earnings on that money, is 100% “vested”—meaning that it will always be 100% yours. (There are some restrictions as to when/how you can take that money back out of the plan.) You do not necessarily have an immediate right to contributions made by your employer, however. Ownership of those funds is earned by providing years of service to your employer, according to a “vesting schedule.” These schedules can vary, so you should review your SPD for the specifics of your plan.
Your employer’s retirement savings plan is a key component of your future financial security. It is important for you to understand how your plan works and what benefits you will receive. Servant HR has helped many employees to understand and receive these benefits. And although you may not be able to contribute the maximum allowed by the IRS each year ($17,000 in 2012—$22,500 if you are over 50), you should try to contribute at least enough to gain the benefit of any matching funds your employer offers. Remember, it is FREE MONEY!
Learn more about the benefits of retirement savings at http://www.dol.gov/ebsa/pdf/savingsfitness.pdf
by Mike Yoder | Employee Benefits, General
By Mike Yoder, CEO of Servant HR
Many employers may overlook the necessity of workers’ compensation believing it does not pertain to them or their company. But consider these two rather bizarre claims:
• An employee was proving that he could carry an air compressor and strained his back.
• An employee tripped over a dog and injured herself while meeting with a customer in the customer’s home.
Yes, you may have guessed it, these claims were found in court to be compensable. At Servant HR, we receive frequent questions regarding workers’ comp, such as:
• Why am I required to have coverage?
• Why do I have to pay when no one ever gets hurt on the job?
• Why do particular employees cost so much, despite having reasonably “safe” jobs?
• Shouldn’t health insurance cover any injuries?
• Does workers’ comp really have to pay if it is clearly the fault of a negligible employee?
By definition, workers’ compensation is an alternate way for employees to recover costs for work-related injuries, rather than suing their employers. Workers’ compensation includes an “exclusive remedy” component, meaning if an employee gets hurt at work, his bills and typically his lost wages, are paid. However, exclusive remedy also ensures that the employee can’t file a lawsuit against the employer, in most situations. It’s an exchange of rights and benefits for both the employee and employer. The workers’ comp system provides employees with the security of knowing they can recover for work-related injuries without the complexity and uncertainty of a lawsuit.
Workers’ comp can be thought of as an insurance policy for your company. Just like home owners and life insurance, you are required to regularly pay, even if you never have to use it. The rates are determined from the statistics and probability of an accident or hazardous situation for a particular occupation.
If a claim is made by an employee, a workers’ compensation insurer generally reviews the case and verifies any issues. As the exclusive remedy, any injury happening in the workplace is generally covered, even if an employee is negligent. However, an employer may choose to dispute a claim, for example, if he believes an injury is not related to work or is being put-on. Regardless, it is generally in the best interest of the employer to get the employee back to work even on limited duty, rather than being paid lost wages from the policy.
For answers to your workers’ compensation questions or to find out more about how Servant HR can help with all of your HR needs, please contact us today.
by Loren Elms | Employee Benefits
By Loren Elms, CPP, Payroll Administrator
Have you ever wondered why we pay federal income tax? It might surprise you to learn that the U.S. government once relied mainly on customs taxes as its primary source of income. It was actually the enormous cost of the Civil War (1861-1865) that led to the establishment of the first federal income tax.
Several years later, in 1942, a “pay-as-you-go” income tax system was developed to ensure that everyone paid their appropriate taxes. This system is still in place today, as employers continue to be responsible for withholding a percentage of your paycheck for federal taxes. The amount withheld is based on several factors that you report using Form W-4:
• Your marital status – single or married (If you´re married, you can opt to withhold at the higher single rate.)
• The number of withholding allowances you claim. (Allowances determine how much money will be “ignored” when calculating your tax withholding.)
• Any additional fixed dollar amount you would like withheld from each paycheck.
The more allowances entered on your W-4 form, the less income tax the government withholds from your pay. This increases your take-home pay. However, if you have too little taken out, you’ll owe money to the government when you file your annual tax return. If you have too much withheld, you’ll get a refund. Although getting a large refund may seem like a good thing, it basically means you’ve given the government what amounts to an interest-free loan throughout the year.
You may want to review your withholding amount if any of the following is true:
• You had a big refund last year
• You owed more money last year than you could comfortably pay
• You had a life or financial situation change that affects the number of allowances you can claim or the amount of tax you will eventually owe (e.g., marriage, birth of a child, purchase of a home). You have 10 days after the event to file a new Form W-4 with your employer.
Most tax experts agree that the best course of action is to adjust your withholding so that your tax payments will equal your actual tax liability for the year. Worksheets are included with Form W-4 to help you figure out what changes you should make to your withholding amount. You may also find related IRS publications useful: Publication 505 (“Tax Withholding and Estimated Tax”) and Publication 919 (“How Do I Adjust My Tax Withholding?”). These publications, as well as an interactive withholding allowance calculator, are available at www.irs.gov.
If you file a new W-4 with your employer and end up with a bit more cash each paycheck, don’t automatically spend it. Consider opening an account where that extra money will earn you, and not the federal government, interest.
