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Federal Regulatory Updates for 2016

Employee Benefits

A number of key announcements made by the federal government may affect employers in 2016. Updates to OSHA penalties, the Social Security wage base, enhancements to the e-Verify System, and the launch of a national individual retirement account are among those generating the most attention among business owners.

OSHA Raising Penalties for Safety Violations

For the first time in 25 years, the Occupational Safety and Health Administration (OSHA) may be increasing penalties on employers that violate workplace health and safety regulations. The bipartisan budget that President Obama signed in November allows OSHA penalties up to 80 percent higher than before. Maximum repeat or willful violations could jump from $70,000 to $124,768 per offense, while maximum serious violations could rise from $7,000 to $12,477 per offense.

The new budget allows for an initial penalty "catch-up" adjustment, which must be in place by Aug. 1, 2016. The catch-up adjustment is tied to the percentage difference between the October 2015 Consumer Price Index (CPI) and the October 1990 CPI. After the initial catch up adjustment, OSHA will be required to implement annual cost of living increases by mid-January each subsequent year.

Social Security Wage Base Remains at $118,500 for 2016

The Social Security Administration (SSA) announced in October that the 2016 Social Security wage base will remain at $118,500 for all individuals, and there will be no limit for Medicare wages.

The Internal Revenue Service (IRS) will tax all covered Medicare wages at 1.45 percent, with an additional 0.9 percent assessed on wages above $200,000. The IRS will tax Social Security wages at 6.2 percent, up to the wage base. Employers will not pay the additional 0.9 percent Medicare tax. Self-employed individuals, subject to a Medicare tax rate of 2.9 percent, will be taxed at 12.4 percent for Social Security wages up to the wage base.

The SSA provides an online fact sheet that covers changes for 2016.

E-Verify System Enhancements

E-Verify, the online federal system that allows businesses to determine employees' eligibility to work in the United States, has made two upgrades that employers should appreciate:

  • TPS auto extension
    This makes it easier for E-Verify to confirm that the employment authorization of a worker with temporary protected status was automatically extended, which may result in quicker E-Verify responses to the employer.
  • Further Action Notices and tentative non-confirmation (TNC) e-mails
    E-Verify Further Action Notices and TNC employee emails now include a link to myE-Verify Case Tracker. Workers can use this free, user-friendly online tool to follow the status of their E-Verify cases.

myRA (my Retirement Account) Launches National Campaign

In November 2015, the U.S. Treasury launched the myRA program for workers who don't have access to an employer-sponsored retirement savings plan or who lack other saving options. This national program, essentially a Roth individual retirement account (IRA):

  • Carries no fees or costs to open;
  • Does not risk the loss of an investor's principal; and
  • Can be opened with any contribution amount.

The program allows participants to have contributions drawn directly from a checking or savings account, rather than direct deposit only. This encourages use by myRA's target audience: nonsavers, particularly those who don't receive a regular paycheck; self-employed business owners; and those not covered by, or not eligible for an employment-based plan.

Like a Roth IRA, contributions to myRA are made after taxes, so the funds won't be taxed again when the account owner takes qualified distributions.

Individuals who contribute to a Roth IRA with modified adjusted gross income (AGI) below certain levels for the year are eligible to claim a saver's tax credit for their contributions. The government may adjust AGI thresholds in later years to reflect cost-of-living increases.

Employers can help eligible workers take advantage of myRA by publicizing its availability and helping appropriate individuals sign up. The program is a boon for businesses, too, because they can ensure that every worker has the chance to build retirement savings, even without a company-sponsored retirement plan.


This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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