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| November 2003 | Issue VI |
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This issue's topics are: |
SOCIAL SECURITY WAGE BASE INCREASES TO $87,900 FOR 2004
The Social Security Administration announced that the social security wage base for calendar year 2004 will rise to $87,900. This represents an increase of $900.00 from the 2003 limit of $87,000. The FICA tax rate remains at 6.20%. The Medicare tax rate of 1.45% will continue to be assessed against all covered wages. The maximum social security tax to be paid by employers (per employee) and by each employee will be $5,449.80, which is an increase of $55.80 over the 2003 maximum of $5,394.00.
2004 PLAN LIMITS RELEASED
The Internal Revenue Service (IRS) has released the revised employee maximum plan contribution limits, along with the new FICA rate, to be effective on January 1, 2004. Although the ProBusiness division of ADP National Account Services does not administer many of the plans noted below, we believe clients will find this information useful.
| Plan Maximum Contribution Limits | 2003 | 2004 |
| Section 401(k) Plan or SAR-SEP | $12,000* | $13,000* |
| Section 403(b) Plan | $12,000* | $13,000* |
| Section 408(p)(2)(A) SIMPLE Plan Contributions | $8,000* | $9,000* |
| Section 457(b)(2) Limit | $12,000* | $13,000* |
| Section 415 Limit for: | ||
| Defined Contribution Plans | $40,000 | $41,000 |
| Defined Benefit Plans | $160,000 | $165,000 |
| Highly Compensated Employees | ||
| Section 414(q) | $90,000 | $90,000 |
| Key Employee | ||
| Section 416(i)(1)(A)(i) | $130,000 | $130,000 |
| Control Employee Compensation | ||
| Section 1.61-21(f)(95)(i) fringe benefit | $80,000 | $80,000 |
| Section 1.61-21(f)(5)(iii) | $160,000 | $165,000 |
| Includible Compensation - Sec. 401(a)(17) | $200,000 | $205,000 |
| SEP Compensation | $200,000 | $205,000 |
| SEP Earnings Threshold | $450 | $450 |
| Limited Governmental Plans (pre 7/1/93) | $300,000 | $305,000 |
| Employee Stock Ownership Plan - Sec. 409 | $815,000 | $830,000 |
| Max. to lengthen 5-year distribution | $160,000 | $165,000 |
| Transportation Benefits - Section 132 | ||
| Parking | $190 | $195 |
| Transit | $100 | $100 |
| FICA Taxable Wage Base | ||
| Social Security (Tax Rate 6.20%) | $87,000 | $87,900 |
| Medicare (Tax Rate 1.45%) | No limit | No limit |
| * Indicates EGTRRA Annual Increase | ||
COURT RULES FAMILY MEDICAL LEAVE ACT (FMLA) REQUIRES THREE CONSECUTIVE DAYS OF INCAPACITY
The United States Court of Appeals for the Eleventh Circuit has upheld a Department of Labor regulation requiring that an employee be incapacitated for three consecutive days in order to be deemed to have a serious health condition under the FMLA, and further, it requires three full days of incapacity.
The language most pertinent to the ruling is set out in 29 C.F.R. § 825.114 - it states:
"For purposes of FMLA, "serious health condition" entitling an employee to FMLA leave means an illness, injury, impairment, or physical or mental condition that involves: Continuing treatment by a health care provider. A serious health condition involving continuing treatment by a health care provider includes any one or more of the following: A period of incapacity (i.e., inability to work, attend school or perform other regular daily activities due to the serious health condition, treatment therefor, or recovery therefrom) of more than three consecutive calendar days, and any subsequent treatment or period of incapacity relating to the same condition."
The Plaintiff-Appellant in this case, Margaret Russell, was injured in a fall at work on May 30th. During the next ten days, Russell was in and out of work, but only absent for a full day of scheduled work on June 7th. The other working days during this period of time, Russell worked only partial days. On June 12th, the Defendant-Appellee, North Broward Hospital terminated Russell's employment for "excessive absenteeism." Russell argued that partial days of incapacity are enough to satisfy the regulations, and it is "undisputed that she was incapacitated for parts of more than three consecutive calendar days during the period from May 31 to June 6th. " Further Russell argued that the FMLA does not explicitly require three consecutive calendar days of incapacity of an employee to qualify for FMLA. As a fallback position, Russell argued that even if the regulations require "more than three consecutive full days of incapacity," it is invalid.
The Court rejected these arguments since Congress delegated to the Secretary of Labor the authority to "prescribe such regulations as are necessary to carry out" the FMLA's general requirements for leave. The regulation at issue here was promulgated in the exercise of that authority, using formal notice and comment rulemaking procedures.
Consequently, the Court ruled as follows:
"We hold that 29 C.F.R. § 825.114, the Department of Labor's regulation requiring that an employee be incapacitated for more than three consecutive calendar days in order to have a qualifying 'serious health condition,' is valid. And it is properly understood to require more than three consecutive full days of incapacity; consecutive partial days are not enough."
If interested, the case citation is: Russell v. North Broward Hosp., 11th Cir., No. 02-13343, 10/2/03.
2004 MILEAGE RATE FOR OBTAINING MEDICAL CARE INCREASED
On October 8, 2003, the IRS announced, via Rev. Proc. 2003-76, that the standard mileage rate for the use of an automobile to obtain medical care (as defined in Code Section 213) will increase from 12 cents to 14 cents per mile beginning with expenses incurred on or after January 1, 2004.
For a copy: http://www.irs.gov/pub/irs-drop/rp-03-76.pdf
For a copy of the news release:
http://www.irs.gov/newsroom/article/0,,id=114320,00.html
IRS RELEASES 2003 IRS FORM 2441
The IRS has released the version of the Form 2441 ("Child and Dependent Care Expenses") and its Instructions that must be used by individuals claiming dependent care expenses in the 2003 calendar year. Regardless of whether the participant chooses to enroll in the Dependent Care Spending Account or claim the federal tax credit, the participant must submit IRS Form 2441 along with his or her personal annual income tax filing.
For a copy of the Form: http://www.irs.gov/pub/irs-pdf/f2441.pdf
For a copy of the Instructions: http://www.irs.gov/pub/irs-pdf/i2441.pdf
2003 PUBLICATION 502 RELEASED BY IRS
The IRS has released the 2003 version of Publication 502 (Medical and Dental Expenses), which may be used by taxpayers to determine what medical expenses are deductible for tax purposes under Code Section 213. Please note: Publication 502 is designed to figure personal tax deductibility. It should only be used as a guide in determining what may or may not be reimbursed under a Section 125 Health Care Spending Account.
For a copy: http://www.irs.gov/pub/irs-pdf/p502.pdf
Please contact ProBusiness for further
information at:
20000 North Creek Parkway, Suite 200, Bothell, WA 98011
Phone: (425) 415-4000 Fax: (800) 269-5231
e-mail: bsa@probusiness.com
(ProBusiness does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter should not be construed as legal advice. Your legal counsel should be consulted on all specific fact situations.)
