Customer Support during COVID-19

An Executive Memorandum issued in August 2020 allowed for the deferral of withholding, depositing and paying of the employee portion (6.2%) of the Social Security tax until Dec. 31, 2020. Although not mandated, employers were given the option of offering the choice of deferral to employees.

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Employers will be required to withhold and remit any deferred employee Social Security tax ratably between Jan. 1 and Dec. 31, 2021 from its employees who took the deferral.

• Employees who took the deferral will have both their regular 6.2% Social Security tax obligation and a ratable portion of their deferred amount withheld from their checks for 12 months. To withhold ratably means that if the employee deferred $800 and there are 26 pay periods between Jan. 1 and Dec. 31, the employee will see about an extra $31 withheld (in addition to their required Social Security tax) from their paycheck for 26 straight pay periods.

Yes, interest and penalties begin to accrue Jan. 1, 2022 on any unpaid amounts.

The Coronavirus Aid, Relief, and Economic Security Act (CARES), enacted under the previous administration, was a financial stimulus package designed to help small businesses stay afloat and help offset the financial challenges created by the COVID-19 pandemic.

Some of the provisions were aimed at businesses and included forgiveness for Paycheck Protection Program loans, tax credits for retaining employees. Other provisions impacted health insurance and offered relief for participants of 401(k) retirement plans and Individual Retirement Accounts (IRAs). 

Some of the provisions of the Act expired Dec. 31, 2020 and were not renewed in any current legislation.

The employer Social Security tax deferral, which essentially was an interest-free loan, enabled employers to defer payment of their portion of Social Security tax between March 27, 2020 and Dec. 31, 2020. Repayment of deferred funds are due at two separate dates: 50% by Dec. 31, 2021 and the other 50% by Dec. 31, 2022.

Examples of garnishments include bankruptcy, child support, child support arrears, federal tax levy, income execution, miscellaneous garnishment, state tax levy, tax agency, vendor or WRIT. Garnishments are governed by government agency or court orders and garnishment payments must continue until a formal notice is received from the entity that issued the garnishment advising that the garnishment has been satisfied, or that collections are to cease.

Yes. Unless a garnishment is subject to a stop order, garnishment wages paid through the new pay codes are subject to garnishment.

The Families First Coronavirus Response Act (the "FFCRA") was a federal law that provided employers with fewer than 500 employees refundable tax credits for the costs of providing employees with qualifying paid leave taken for specified reasons related to COVID-19. Leave was available under the FFCRA’s Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA).

Potential exemptions were in place for employers with fewer than 50 employees and for those with fewer than 25 employees.

Yes. The mandates that employers provide paid sick leave and expanded family and medical leave under the FFCRA expired Dec. 31, 2020.

Under the Consolidated Appropriations Act, 2021, an employer with fewer than 500 employees can claim credits through March 31, 2021 if they voluntarily continue to allow employees to take paid sick and family leave under the FFCRA framework.

The American Rescue Plan Act, signed March 11, 2021, further extended and expanded the payroll tax credits for  employers who voluntarily provide paid leave to employees under the FFCRA framework. Employers could be eligible to claim the credit under this law from April 1 through Sept. 30, 2021.   

It should be noted that even though there is no federal mandate to provide FFCRA leave after Dec. 31, 2020, employers should review their obligations under state or local laws related to employee leave and/or job protection.

Yes. Qualified health plan expenses paid by the employer that are associated with wages paid under the Emergency Sick and Family Medical Leave Child Care earnings also are eligible for a dollar-for-dollar credit until March 31, 2021 under the Consolidated Appropriations Act, 2021 and then from April 1 through Sept. 30, 2021 under the American Rescue Plan Act.

Through March 31, 2021

Employer taxes on COVID-19 paid leave earnings are:

• Taxable for the Medicare portion of FICA
• Exempt for the social security portion of FICA

Employee taxes on COVID-19 paid leave earnings are:

• Taxable for the Medicare portion of FICA
• Taxable for the social security portion of FICA

From April 1, 2021 to Sept. 30, 2021

• Paid sick leave and family leave wages are now subject to the employer share of Social Security tax. 
• The credits for leave under the framework of the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA) will be structured as a nonrefundable payroll tax credit against the Medicare tax only (1.45%). 

By reporting amounts through the earning codes Paychex has set up, we’ll calculate the dollar-for-dollar credit and reduce your federal tax liability on future payrolls. Any excess amount will be carried-over and applied as a credit to the next payroll. Any excess credit at the end of the quarter will be marked for a refund by the IRS on the 941.

Yes, you will need to track and report wages paid to employees for eligible paid leave benefits covered under the FFCRA or for leave eligible for credits under the FFCRA framework from Jan. 1 through Sept. 30, 2021. We have updated our payroll system with new earnings codes to enable you to correctly report such wages.

The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act both provide refundable tax credits for qualifying wages. There are three reasons you might file a Form 7200:

• Employee Retention Tax Credit (CARES Act) 
• Refund of wages paid for qualified sick leave ((FFCRA)
• Refund of wages paid for qualified family leave (FFCRA)

Paychex will apply the amount of the credit to the federal tax liability, which in most cases is the quickest way to use the credit. If the amount of the credit exceeds the federal liability, and you choose not to carry the credit forward to the liability for the next check date, you can complete a Form 7200 to apply for an accelerated credit from the IRS. NOTE – you must inform Paychex if you are filing a Form 7200. If you do not inform Paychex, we will continue to apply the credits to their next payroll which may result in potential liability for your business.

Yes, after you let us know that you’ve filed one or more Form(s) 7200.

 If you submit a Form 7200, provide a copy of it to Paychex before the end of the quarter for which it was filed. Include the following:

• Contact name, phone number, and email address
• Date you filed the Form 7200

Important

You are not required to file Form 7200; Paychex will apply the amount of the credits to your federal tax liability, which in most cases is the quickest way to use the credit

If you file Form 7200, you must inform Paychex. If you do not inform Paychex, that you filed these forms, we may apply credits that you’ve already requested; you most likely will incur penalties assessed by the IRS.

You can find Form 7200 and the instructions on the IRS website.

Yes, Paychex will need to know of each Form 7200 that you submit so that we don’t also apply a credit that was requested, and so that we reflect it properly on the 941.

Yes. You can file as many Form 7200s as necessary to request excess credit amounts as an expedited refund through Dec. 31, 2021.

Please refer to the IRS instructions for completing Form 7200.

Yes. Form 7200 can be used to apply for expedited refunds of credits related to sick leave wages and family leave wages (FFCRA) and also for the credits related to employee retention (CARES).

You can fax the form to 855-248-0552.

Yes. The Internal Revenue Service (IRs) released new guidance stating that after July 2, 2020, Forms 7200, Advance Payment of Employer Credits Due to COVID-19, that are filed must request a minimum credit amount of $25.00. Any credit advance requested on the form that totals less than $25.00 will not be processed by the IRS. Any credit advance under $25 can be claimed by reducing a future deposit or claimed on Form 941 at the end of the quarter.

We have temporarily suspended pick up in our offices. We have alternatives – access all your payroll information online, get overnight delivery from a courier service, set up direct deposit or other payment methods, or receive your package through the U.S Mail. Contact your Paychex service representative for more information about these services.

Now more than ever, you and your employees need the security of knowing that payroll wages will be deposited on time as expected. This is the perfect time for you to set up employees without direct deposit for this service.

Additionally, we have flexible payroll payment options, such as Pay On Demand that allows employees easy access to earned wages, in advance of payday, at no cost to you.

Contact your Paychex service representative for more information about these services.

We’re in the process of developing and testing software to support the leave that can be taken by eligible employees for qualifying reasons under FFCRA.

• Emergency Sick Leave – Employee Self-Care
• Emergency Sick Leave – Family Care
• Expanded Family Medical Leave

If circumstances require you to pay wages before software changes are implemented, we’ll work with you to pay the wages now and manually update our systems.

We’ll send another message closer to the release of the software changes to give you additional detail about how these earnings will be reported in our systems.

You can easily run payroll from anywhere through Paychex Flex® and our mobile app while saving time on payroll-related tasks. This gives you time to focus on other things, such as checking on your employees’ well-being.

You’ll be able to:

• Enter and submit payroll using self-service functionality in as few as two clicks
• View critical data at a glance, such as check dates and cash required for your next payroll
• Set up direct deposit, so your business can pay employees on time
• Track hours for employees working remotely
• Run reports, such as your payroll journal, cash requirements, and tax deposit notices

You can also give your employees the freedom to:

• View paystubs online
• Set up or change direct deposit
• Update their banking information
• Update their personal contact information (phone, email, address) to help with contingency planning
• Check time-off balances

Contact your Paychex service representative, they’ll work with you to set up our online payroll application, Paychex Flex.

If you use our Paychex Flex online payroll service, you can add/change employee direct deposit information using these instructions. Employees can add/modify their direct deposit accounts through their self-service Paychex Flex account.

If you don’t use Paychex Flex, contact your payroll service representative.

Paychex provides online, cloud-based solutions for employees to use while working remotely. Learn more about these options and more in this WORX article on the benefits of time and attendance tracking.

Each state has their own workers’ compensation policy and specific coverage requirements that are usually based on a business’s industry, size, and general structure.

Typically, workers’ compensation does not cover community-spread illnesses, such as colds or the flu, because they generally cannot be tied to an individual’s place of employment. However, due to the COVID-19 pandemic, many states have or are attempting to pass executive orders, general legislation, or policy changes to extend workers’ compensation coverage for first responders, health care workers, and other essential personnel who are at greater risk of being impacted by COVID-19.

For more information about state-specific requirements, navigate to your applicable state’s workers’ compensation website, or contact your insurance carrier directly for specific coverage information

If a compensable injury happens while a remote employee is conducting work-related activities, they will typically be covered under your applicable state’s workers’ compensation laws. However, the nature of and specific details surrounding that injury will ultimately factor into an employee’s eligibility for benefits.

If an employee begins to work remotely from a different state, the employer should work with their insurance representative to ensure that their workers’ compensation insurance extends to that location. It’s also important to specifically describe an employee’s general job duties and work hours, if they will change.

For more information about state-specific requirements navigate to your applicable state’s workers’ compensation website.

Workers’ compensation premiums tend to be determined by how many people are employed and what type of industry that they’re employed in, so higher national and/or state unemployment rates can affect premiums.

Many states have announced or proposed changes that may affect workers’ compensation insurance class codes. These changes vary, but most include the ability for businesses to temporarily reclassify for the purposes of workers’ compensation coverage employees who are being paid but not working, and some states allow businesses to reclassify employees temporarily reassigned to clerical roles.

For more information about state-specific changes to workers’ compensation insurance class codes and premium payments, please visit your applicable state’s workers’ compensation website.

Many states have either effectively passed new legislation, have proposed legislation that is currently pending, or have proposed legislation that has since failed regarding changes to their state-specific workers’ compensation (WC) policy. Although legislation topics vary by state, most tend to focus on, but are not limited to:

• Adding COVID-19 as a recognizable and compensable disease under state-specific WC policy
• Extending WC eligibility/coverage to "essential employees" as defined by individual states
• Adding/editing who constitutes as "essential employees" as defined by individual states
• Reworking existing policies to account for COVID-19-positive "essential employees" as defined by individual states

For more information about changes to state-specific WC regulations, navigate to your applicable state’s workers’ compensation website.

Many states have announced or proposed changes that may affect workers’ compensation insurance class codes and premium payments.

Workers’ compensation class codes are three or four-digit numbers that insurance companies can use to easily identify specific classifications or categories of work. Insurance companies use class codes to estimate workers’ compensation rates based upon the associated risk with the type of work being done.

Although most states utilize the National Council on Compensation Insurance (NCCI) workers’ compensation insurance class code system, there are a few states that use independent bureaus or are monopolistic.

For more information about changes to state-specific workers’ compensation insurance class codes, visit the NCCI website, explore your applicable state’s workers’ compensation website, or reach out to your insurance representative for information on your specific situation.

If an employee is terminated, has hours reduced, or is moved to a different status (Full Time to Part Time) that results in a loss of health insurance eligibility, the client is responsible for notifying Paychex PEO to have the correct status applied. Once Paychex has been notified of any change and this has been updated in our system, the employee will receive their COBRA notification.

Additionally, the eligibility for PEO plans is 30 hours per week, therefore if an employee’s hours have been reduced to less than 30 a week, the employee’s status should be updated to “PT” or “terminated” to start the COBRA notification process.

If you are a PaychexOne or Oasis client, please contact your HR professional with any additional questions.

If the employee is reinstated within 30 days of the date employment is discontinued, benefits are automatically reinstated without a waiting period, effective the first of the month following the date employment is discontinued to avoid a lapse in coverage. If there is a break in service of more than 30 days, the employee would begin a new waiting period.

Example: An employee is let go on 3/20 and rehired on 4/5 (less than 30 days apart); benefits would be reinstated 4/1, and any missed premiums would be deducted on the monthly PEO Benefits Administration Summary, if applicable.

You are responsible for determining Full Time (FT)/Part Time (PT) status, tracking changes to employee average hours worked, and making updates to FT/PT status in payroll. Under the benefit plans offered through the PEO, if you change an employee from FT to PT, their benefits will terminate on the last day of the month in which the change is effective. An employee who works at least 30 hours a week is full-time under the PEO plan. A small dip in average hours worked does not necessarily require a change to FT/PT status. We recommended that you use discretion when making changes to an employee’s FT/PT status during this time. If you self-retain benefits, you should contact your broker/administrator for direction.

Keep in mind that Applicable Large Employers (ALE) under the Affordable Care Act’s Employer Shared Responsibility (ESR) provisions have additional considerations. An ALE that utilizes the Look-Back Measurement Method must offer adequate and affordable coverage to employees determined to be full-time employees for the duration of the stability period or risk potentially being assessed a penalty if a full-time employee receives a premium tax credit when purchasing insurance in a government marketplace. An offer of COBRA coverage qualifies as an offer of coverage for ESR purposes but is less likely to be affordable under ESR provisions, putting the ALE at risk of an assessment.

Note: If employees don’t have enough gross wages to cover their benefit premiums, they will not be deducted. Premiums will be captured on your monthly PEO Benefits Administration Summary. For more information, see the "When I’m ready to rehire employees that were let go, would the benefits waiting period still apply?" FAQ.

No, Short-Term Disability (STD)/Long-Term Disability (LTD) plans do not coordinate with any other benefits.

Paychex PEO account numbers are not provided to our clients. We understand that some states are requiring PEO account numbers when a claimant is filing, however, we advise employees to put “on file” when the account number is requested.

For customers using Paychex Retirement Services offerings, please contact a Paychex representative or visit our customer support page.

Among other things, the Consolidated Appropriations Act, 2021 (CAA) includes some optional provisions for retirement plans regarding non-COVID-19-related disaster assistance and temporary relief for partial plan termination rules.

The retirement plan provisions introduced by the CAA are optional, which means that a plan sponsor is not required to adopt them. If a plan sponsor were to accept any of these new provisions, they would have to provide notice of new plan provisions to any impacted employee(s).

The CAA allows qualified individuals, defined as those who live in an area where a major disaster was declared by the President during a designated incident period and suffered an economic loss as a result, the ability to take up to $100,000 from their retirement account via a loan or withdrawal without experiencing a tax penalty. This provision is only for non-COVID-19 related disasters as declared by the President on or after January 1, 2020 and extending through February 25, 2021, and the related incident period must have started on or after December 28, 2019 and on or before December 27, 2020.

Loans or withdrawals are not be subject to the 10% early distribution penalty, are taxable over a three-year period (unless elected otherwise by the individual) and may be repaid to a tax-qualified retirement plan or IRA within a three-year period beginning on the day after the distribution.

The CAA also allows for participants to recontribute hardship distributions taken for the purchase or construction of a home in a qualified disaster area, if the funds were not used due to the qualified disaster.

No. If your retirement plan offers hardship withdrawals, and the state in which the qualifying plan participant resides (or is employed) is declared a federal disaster area by the Federal Emergency Management Agency (FEMA), the participant may be eligible for a 401(k)-hardship withdrawal for expenses and losses incurred because of the disaster. FEMA is updating the state list regularly at fema.gov/disasters. 

For more information, please review the Retirement Plans FAQs provided by the IRS.

Paychex does not allow for refinancing or increasing existing loan amounts. The plan would have to allow for two loans, and the participant would need to take a second loan if desired.

Plan administrators can notify their plan participants that they can update their payroll deferrals to 0% via the Paychex Retirement Services website. Participants can then adjust that deferral any time they see fit.

If the 401(k) plan employer match is not a Safe Harbor match, the plan administrator can amend the plan to stop the employer match immediately and restart at a later time. If the plan is Safe Harbor, participants will need 30 days advance notice of the change that the match and Safe Harbor will be discontinued. The plan will also be subject to ADP/ACP compliance testing for the plan year. Safe Harbor plans cannot restart the match until the following plan year.

Eligible workers must file claims through their applicable state’s unemployment insurance website.

For information on state-specific eligibility requirements, how to apply for, and how to file unemployment insurance claims, please visit the U.S. Department of Labor’s website or review their COVID-19 Unemployment Recourses.

Specific information that is required to apply for unemployment benefits may vary by state, however, information that is generally required includes:

• Social Security Number
• Driver’s license or state ID card number
• Up-to-date personal contact information (complete mailing address and telephone number)
• Name and dates of previous employment
• Most recent paystubs
• Amount of any separation pay (severance, vacation, etc.)
• A specific reason for filing for unemployment

Additional information may be required for non-U.S. Citizens, federal employees, or former military service members.

For more information, please visit your applicable state’s unemployment insurance website.

Unemployment insurance is a shared state and federal program. Although each state has its own unemployment insurance program, all states abide by the same general guidelines set by federal law.

Specific turnaround times vary by state agency; however, it generally takes two to three weeks to receive the first benefit check after filing a claim. Due to the increased number of claims filed in the wake of the COVID-19 pandemic, turnaround times may be longer than normal and can sometimes extend up to six weeks.

Please visit the U.S. Department of Labor’s website or your applicable state’s unemployment insurance website for more information.

Employees must file claims through their applicable state’s unemployment insurance website or by phone. For information on state-specific eligibility requirements, how to apply for, and how to file unemployment insurance claims, please visit the U.S. Department of Labor’s website or review their COVID-19 Unemployment Recourses.

We’ve also created a state-by-state breakdown to help direct you to your applicable state’s COVID-19 resource pages.

Employees working reduced or partial hours may be eligible to receive supplemental unemployment benefits. Eligible employees must meet specific state requirements before receiving unemployment benefits.

For more information, please visit the U.S. Department of Labor’s website, or check with your applicable state's unemployment insurance office or website.

Yes, that’s why we’ve created a state-by-state breakdown to help direct you to your applicable state’s COVID-19 resource pages. These resources contain up-to-date information on unemployment insurance benefits, as well as general FAQs, on other programs available during this time.

Any employee who has been partially or fully laid off (temporarily or permanently) should be directed to your applicable state’s unemployment website, with instructions on how to file an unemployment claim and what information is required. Our state-by-state breakdown was created to help direct individuals to their applicable state’s COVID-19 resource pages. You can also visit the U.S. Department of Labor’s website for more information or review their COVID-19 Unemployment Recourses.

When partially or fully laying off (temporarily or permanently), it is important to remember that, when terminating an employee from the system, that the process is completed in a timely manner. This will help provide us with important information required to respond to unemployment claims timely and accurately. Such information includes the employee’s first and last day worked, job title, rate of pay and the reason for the separation.

Ensuring we have up-to-date contact information is also important when utilizing Paychex for administrative support with claims processing.

Disqualifying income varies by state. To determine what types of payments are considered disqualifying, please visit your applicable state’s unemployment insurance website.

On December 27, 2020, former President Donald Trump signed a $900 billion federal COVID-19 relief bill which provided American’s earning under $75,000 a year with a $600 stimulus check. It also added an additional $300 per week of unemployment money for up to 11 weeks that is automatically added into state benefit checks or deposits. Unemployment coverage for contract and gig workers was also extended for up to 11 weeks.