What are WPA Creditable Benefits?

Executive Summary. Home care agencies in New York are still experimenting with different ways to meet the State’s Wage Parity Act (“Act” or “WPA”) requirements. The Act requires a minimum basic wage (cash) of the applicable New York State minimum wage plus additional wages or supplemental wages (i.e., benefits) equal to another $4.09 per hour in NYC or $3.22 per hour in Nassau, Suffolk and Westchester counties (the “WPA Package”).

Options for WPA Packages. Some agencies prefer to provide the entire required amount as cash wages; that, however, causes the entire amount to be subject to employment taxes, which are an additional cost to the agency but are not creditable against the WPA Package. Other agencies provide some additional cash wages plus some non-taxable benefits, such as minimum value health plan coverage in order to avoid penalties under the Affordable Care Act. Still others provide additional benefits, creating a WPA Package that provides everything from transportation benefits to cell phone plan reimbursements.

Advantages of Benefits vs. Cash. The goal for agencies is to deliver the WPA package in a way that is tax advantaged. When this is done properly, it can be a “win-win” for the agency and the worker. The agency takes an income tax deduction for the actual cost of providing benefits and avoids employment tax costs, plus the entire amount is creditable against the agency’s WPA obligation. The worker receives the benefits at no cost and, in most cases, without tax, making the benefits more valuable to the worker than additional cash wages.

Pitfalls with Tax-free Benefits. But this win-win situation for the agency and worker is not always easy to achieve. Not everything qualifies for tax-advantaged treatment – it requires complying not only with the WPA, but also with many other federal and state laws, including the Internal Revenue Code, ERISA, the Affordable Care Act, and wage and hour laws, including the NYS Domestic Workers’ Bill of Rights. Each of these laws has specific rules about how benefits must be set-up and operated. Just because a benefit meets the standards of one law doesn’t mean it meets the standards of the other—for example, if a cell phone plan reimbursement program meets all the standards to be tax qualified under the Internal Revenue Code, it is not a creditable cost towards the WPA Package. When the requirements of all of these laws are ignored, agencies expose themselves to government audits, penalties and employee lawsuits. Agencies must consider all these laws and how they interact when choosing WPA benefits.

What to Consider When Choosing WPA Benefits to Offer. In order to take credit for a benefit, agencies may generally consider any non-wage payment that primarily benefits the employee rather than the agency. This, however, is not a very clear standard, and a number of factors must be taken into account in choosing benefit offerings. For example, some benefits provide tax benefits both to the agency and the worker; others do not. Some benefits require that a formal “plan” be established, while others can simply be set up as payroll practices without a formal plan. Some benefits will provide full dollar-for-dollar credit against the agency’s WPA obligation; others will not. Each benefit has its own characteristics, advantages and disadvantages, and tax consequences, both to the agency and the worker.

Conclusion. Choosing, setting up, and administering benefits under the WPA is not straightforward. You should carefully consider each benefit and consult with an experienced attorney representing your interests to make sure your benefit will be creditable under the WPA, tax advantaged, and not leave you exposed to audits and lawsuits under various state and federal laws. 

FordHarrison LLP advises and counsels home care agencies on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact one of the authors, Jeffrey Ashendorf at jashendorf@fordharrison.com and Stephen Zweig at szweig@fordharrison.com, of the firm’s Homecare Industry Law Group in its New York City office at (212) 453-5900. Also, please visit our blog at http://www.homecareemploymentlaw.com for additional developments and information.

Part 4- How Do You Construct WPA Creditable Benefits?

Executive Summary.  Home care agencies in New York are experimenting with different packages of additional wages and benefits to meet the State’s Wage Parity Act requirements. This Act requires a minimum wage rate of $10.00 per hour and additional wages or benefits – a $4.09 per hour package in NYC and a $3.22 package in Nassau, Suffolk and Westchester counties (the “WPA Package”).  Some agencies spend nearly all of the amount above the $10.00 base wage on additional wages, absorbing the additional employment taxes, which are not creditable against the WPA Package.  Other agencies combine additional wages with minimum value and minimum essential health plan coverage in order to avoid penalties under the Affordable Care Act. Still others expand into more items, going beyond additional wages and health plans to create benefit programs that provide everything from transportation benefits to cell phone plan reimbursements. Their goal is to deliver all these benefits tax-free to workers, so receiving the benefits is better than additional wages alone, which subject a worker to income and FICA tax. When this is done properly, it is a “win-win” for the agency and the worker. The agency takes a business tax deduction for the total benefits’ actual cost, the worker receives the benefits without cost and tax-free, and the entire amount is creditable against WPA total compensation. But this can be difficult to achieve. It means complying not only with the WPA, but also with the Internal Revenue Code, ERISA, the Affordable Care Act, and wage and hour laws, including the NYS Domestic Workers’ Bill of Rights. When a benefit is not screened through each of these statutes, agencies are exposed to government audits, penalties, and lawsuits, as well as the soon-to-be announced protocols for validating WPA certifications. Continue reading