While the economy was getting better, pay packages for salaried exempt employees were getting worse in 2003. According to a survey of 1,726 companies by Hewitt average salary increases in 2003 were 3.4%, down from a 3.6% rise in 2002. That was the lowest level recorded in nearly 30 years of Hewitt surveys. Some good news - while 8% of companies had salary freezes in 2003, only 2% expected to have them in 2004.

Financial Planning magazine, November, 2003

A foreign person is generally taxed on the disposition of a U.S. real property interest and must file a U.S. income tax return reporting the gain on such disposition. Final regulations require the foreign person to obtain a taxpayer identification number (TIN) for placement on the withholding tax return and other documentation required to be exempt from or reduce the withholding tax on a disposition of a U.S. real property interest. The regulations are necessary to properly identify foreign taxpayers for which submissions are made for the reduction or elimination of tax under sections 897 and 1445 of the Internal Revenue Code.

Internal Revenue Code (TD 9082).

The IRS has released a revenue procedure that updates the specifications for filing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, magnetically or electronically, using tape, cartridges, or diskettes. The Martinsburg Computing Center (IRS/MCC) has discontinued processing 8mm, 4mm and 1/4- inch cartridges (QIC). The electronic filing system, known as FIRE (Filing Information Returns Electronically), will be down from December 24 through January 5 for upgrading. It will not be in operation during this time for electronic submissions. The revenue procedure must be used to prepare current- and prior-year information returns filed beginning January 1, 2004, and received by IRS/MCC or postmarked by December 31, 2004.

Files containing information returns and requests for IRS magnetic media and electronic filing information should be sent to: IRS-Martinsburg Computing Center, Attn: 1042-S Reporting, 230 Murall Drive, Kearneysville, WV 25430. Requests for extensions and for undue hardship waivers should be sent to the same address, Attn: Extension of Time Coordinator. The telephone number for magnetic media inquiries or electronic submissions is 1-866-455-7438, and the e-mail address is mccirp@irs.gov.

(IRS Rev. Proc. 2003-83, IRB 2003-47, 1102, November 24, 2003.)

Congress cleared a bill for the President's signature that would reauthorize and expand a program for employers to verify that potential employees are eligible to work in the United States. Under the bill, the Basic Pilot Program Extension Act of 2003, S. B. 1685, employers in all 50 states by December 1, 2004, would be able to check social security and alien identification numbers against government records to verify an applicant's eligibility to work.

Currently only employers with operations in six states with high populations of illegal immigrants, California, Florida, Illinois, Nebraska, New York and Texas, can make use of the program. In addition to expanding the program to all 50 states, the bill would reauthorize the program, which is set to expire at the end of November, for an additional five years. The Senate approved the legislation on November 12, and the House followed suit on November 19.

(IRS Rev. Proc. 2003-83, IRB 2003-47, 1102, November 24, 2003.)

Now more than ever, the need and costs of long-term care are on the rise. Unfortunately, this type of care is not covered under traditional health care plans. Those who find themselves requiring long-term care must often look to their families for care and financial assistance that puts a burden on their lives. In an effort to eliminate such burdens, CustomPay is now offering Long-Term Care Insurance on a discounted basis to our customers. The following statistics offer another perspective on how long-term care may affect people who are important to you.

• Over half of all caregivers are in their prime working years. 54% are between 35 and 64 years of age. (Survey 2000 by Bruskin Research for NFCA, National Family Caregivers Association)
• In recent case studies of family caregivers, the average loss in total wealth (wages, pensions, and Social Security benefits) was more than $650,000 over their lifetime. (National Alliance for Caregiving and the National Center of Women and Aging at Brandeis University, The Met Life Juggling Act study, November 1999)
• The national average cost of a nursing home stay is $55,000 per year and can run as high as $93,000 in some states. (U.S. General Accounting Office, 2001 NY Sate Partnership for Long-Term Care, 1999)
• The cost to a company of decreased productivity on average is $3,142 per year, per employee. (1998 NCOA Survey)

The Employee Benefits Security Administration (EBSA) has issued the Reporting and Disclosure Guide for Employee Benefit Plans. The guide, which is prepared by the EBSA with the assistance of the Pension Benefit Guaranty Corporation (PBGC), provides information to assist employers, plan sponsors, service providers and other plan officials in meeting their reporting and disclosure obligations under ERISA.

For the first time, the guide includes information on group health plan disclosure requirements under Part 7 of ERISA and the new blackout period notice, which requires 401(k) and other individual account pension plans to provide advance notice when participants' rights to make direct investments, or take loans or distributions are suspended.

The information in the guide is current as of October 1, 2003, but it does not reflect regulations that have been proposed but not issued in final form as of that date. The guide is available by calling toll-free, 1-866-444-EBSA (3272) or online at the DOL website under Publications.

DOL News Release, November 2003

The Internal Revenue Service has just released new materials, including a CD-ROM, to help small businesses and plan administrators understand how to keep employee retirement plans eligible for tax-favored status.

These materials, in various formats, explain the IRS programs available to assist employee-retirement plan administrators navigate the complex tax laws. The materials also explain how to correct errors in the plans, often without even having to notify or correspond with the IRS. Errors could have tax implications not only for employee plans but also for employees.

"The IRS is committed to providing businesses and plan sponsors with all the information they need and to presenting it in any format they find helpful," said Carol Gold, director of employee plans for IRS. "We want all plans to stay compliant, and we will do what we can to help."

First, Publication 4224, "Retirement Plan Correction Programs," is a pamphlet that provides a synopsis of the various correction programs operated by the IRS, the Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC). This tool, which is especially helpful to plan sponsors and practitioners, explains the help available for a variety of plan problems.

Second, Publication 4050, "Retirement Plan Correction Programs," is a CD-ROM, that offers a more in-depth guide to the correction programs sponsored by the IRS, DOL and PBGC. Highlights of the CD-ROM include:

• IRS Revenue Procedure 2003-44, which sets forth the procedures relating to the IRS's correction programs, and a linked in-depth topical index.
• A plain-language explanation of the IRS's retirement plan correction programs and procedures, with links to definitions and relevant sections of Revenue Procedure 2003-44.
• Video clips explaining the need for ongoing retirement plan self-audit programs and available correction programs.
• A "Guide to Common Qualification Requirements" to help employers understand their responsibilities under the law.
• Examination Guidelines.
• Links to the IRS, DOL and PBGC web sites.
• Frequently asked questions (FAQs) on IRS and DOL correction programs.
• FAQs on IRA-Based Plans (SEP, SARSEP and SIMPLE).

Internal Revenue Service, November 2003

Effective July 1, 2004, all persons who act on behalf of 100 or more taxpayers to remit individual income tax withholding payments are required to remit such withholding using automated clearinghouse credit transactions.

For 2004, the taxable wage base for unemployment insurance and temporary disability insurance (TDI) purposes will increase to $24,300 from the 2003 wage base of $23,900. The TDI employee contribution rate remains 0.5% of annual earnings up to the wage base ($121.50 is the maximum employee contribution for 2004). The TDI new employer contribution rate remains 0.5% of annual earnings up to the wage base; for other employers, the rate continues to vary from 0.1% to 0.75% of annual earnings up to the wage base, depending on the employer's experience rating, account balance, and the TDI fund balance.

Paytech magazine, December 2003