Fall Issue 2003

BRIEFS:

TELECOMMUTING

Over 32 million individuals telecommute each workday and a recent New York State Court of Appeals has held that a women who worked for a New York company from her home in Florida was not eligible to collect unemployment in New York, since her employer had requested here to relocate to New York and she declined. This caused her to be also denied in Florida. Basically, this decision says that telecommuters are not at liberty to shop for the best state to collect unemployment in or file for unemployment in the state where their employer is located, either because they were turned down in their own state or because the employer’s state pays higher unemployment compensation.

CHECK FLOAT

Cash-strapped companies may have avail themselves of the few extra days it takes for the paper check to reach its originating bank for verification after it is cashed. But a new law, known as Check 21, gives banks broader authority to clear checks based upon their electronic images rather than their physical presence. Stephen N Langway, CPA states "the checks companies write will lose the former float time, but on the other hand, there will be faster availability on the collection side".

401(K) PLANS

Since 1966, Department of Labor (DOL) Regulations have required that an employer deposit salary deferrals by the earliest day on which such contributions can reasonably be segregated from the employer’s general assets, but not later than 15 days following the end of the month in which the employer withheld the deferrals. Prior to 2002, Schedule H of Form 5500 required confirmation that the employer had deposited within the maximum time permitted under DOL regulations. The revised Schedule H omits that wording and requires that an employer must transit salary deferrals on the earliest reasonable date (e.g., small employer within 2 days; large employers with multiple payroll centers might require 10 days).

Now where an employer makes a late payment, the DOL treats the delay as a loan from the plan to the employer in violation of the prohibited transaction provisions of ERISA and the IRS. Consequently, besides owing the plan interest on late deposit, the employer is required to file an IRS Excise Tax Return and pay the appropriate excise tax to the IRS.


Because tax laws are complex and often change, you should consult with this office or your tax advisor in addition to reading the information in this document. The information presented is intended to inform and alert the reader of tax, accounting and other items of interest, but since it is presented in abbreviated form and not all-inclusive, it should be implemented only upon in-depth consultation with your appropriable advisors. Also contact referenced venders or online resources for additional specific information and application.

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