IRS Updates Contributions to 401(k) Plans and IRAs

By: Michael P. Sawicki. Esq.

On November 1, 2023, the Internal Revenue Service announced that that the amount individuals can contribute to their 401(k) plans has increased from $22,500 for 2023 to $23,000 for 2024.

The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment of $1,000 for 2024.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan remains $7,500 for 2024. Therefore, participants in such plans who are 50 and older can contribute up to $30,500, starting in 2024.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs and Roth IRAs each increased for 2024. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor the spouse is covered by a workplace retirement plan, the phase-outs of the deduction do not apply. The phase‑out ranges for 2024 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $77,000 – $87,000, up from $73,000 – $83,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $123,000 – $143,000, up from $116,000 – $136,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $230,000 – $240,000, up from $218,000 – $228,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The deductible limit on charitable distributions for 2024 increased from $100,000 to $105,000.

Details on these and other retirement-related cost-of-living adjustments for 2024 can be found in Notice 2023-75, available on IRS.gov.

If you have any questions regarding these updates from the IRS, please contact Batoff Associates. P.A. at 410-864-6211.

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Setting Expectations: Why Your Company Needs an Employee Handbook

By: Alina Pargamanik, J.D.

You have recruited the “ideal” employee to meet your staffing needs. He/she was thrilled to accept your job offer. What happens when it is the employee’s first day of employment and your company has no employee handbook to offer? No expectations, no rules, no formality, the list goes on… In order to avoid these issues, every company should have a well-drafted employee handbook in place and enforced.

What is an Employee Handbook?

An employee handbook does not have to solely consist of a list of rules and procedures for employees to follow. An employee handbook offers employees a clear outline of your company’s history, mission, values, benefits, and, of course, policies and procedures. A well-drafted employee handbook should, at minimum, include policies for the following: harassment, discrimination, discipline for policy violations, social media, compensation/leave, standards of conduct, and privacy/confidentiality. It is also important for the employee handbook to discuss the company’s employee benefits such as 401(k) plans or health plans. The employee benefits policy/provision should encourage employees to review any documents related to employee benefits plans, such as summary plan descriptions.

When distributing an employee handbook to employees, it is important to have the employee(s) sign a statement acknowledging that they have received, reviewed and agree to the policies set forth in the employee handbook. It is also crucial for employers to regularly review the employee handbook to ensure that all policies and procedures align with the company’s standards and comply with any changes in federal or state law. At minimum, employers should review their company’s employee handbook annually. The handbook should be updated as needed, with all changes being communicated promptly to employees.

Examples of Employee Handbook Provisions

Below is a list of provisions that you should consider incorporating in your company’s employee handbook:

  • Equal Employment Opportunity Policy
  • Anti-Harassment Policy
  • Anti-Retaliation Policy
  • Disability Accommodations Policy
  • Religious Accommodations Policy
  • Payroll/Compensation Policy
  • Paid Time Off/Sick Leave/Jury Duty Leave Policy
  • Family and Medical Leave Policy
  • Travel and Business Expense Reimbursement Policy
  • Tuition Reimbursement Policy
  • Attendance Policy
  • Standards of Conduct Policy
  • Performance Review Policy
  • Dress Code Policy
  • Social Media Use Policy
  • Remote Work Policy
  • Smoke-Free/Drug-Free Workplace Policy

Each company should assess which policies should be included in its employee handbook on an individual basis. The list above is not all-encompassing, so it is important to discuss which policies your company should have in place with an employment attorney.  

The Importance of Having an Employee Handbook

A well-drafted employee handbook protects both the employer and the employee. From the employer’s perspective, the handbook may be used as protection against discrimination or unfair treatment claims. The handbook is also a very valuable tool for setting expectations and communicating company policies and practices.

An employee handbook can also serve as an important defense tool for employers in the case of litigation. A handbook can serve as valuable evidence in court to show that the employer was not discriminating against or retaliating against an employee. For employees, an employee handbook could also prove that the employer is not acting in compliance with its own policies and procedures.

If your company or organization needs assistance in drafting or reviewing an employee handbook, please contact Batoff Associates. P.A. at 410-864-6211.

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Major Corporate Governance Changes are Coming. Are You Ready for Compliance with the Corporate Transparency Act?

By: Michael P. Sawicki, Esq.

Effective January 1, 2024, the Corporate Transparency Act (CTA) goes into effect which will require almost every legal entity incorporated, organized or registered in a state to disclose information related to its owners, officers and controlling persons with the Federal Crimes Enforcement Network (FinCEN). The intent of the CTA is to reduce terrorist financing, money laundering and any other illegal activities. The CTA provides criminal (a $10,000 fine or 2 years in jail) and civil penalties (up to $500 per day) for individuals who knowingly provide false or fraudulent information or who fail to comply with reporting requirements.

Companies who will be required to report under the CTA include domestic and foreign privately held entities. A domestic privately held entity is a corporation, limited liability company, or other entity formed by filing a document with the secretary of state or similar office under the laws of that state. A foreign entity includes any private entity formed under the laws of a foreign country that is registered to do business in any state in the US. There are certain exemptions for large operating companies, SEC reporting companies, insurance companies, tax exempt entities and subsidiaries of exempt companies. A large operating company is exempt if it employs more than 20 full time employees in the US with more than $5 million in gross receipts or sales and operates from a physical office in the US.

Reporting companies formed prior to January 1, 2024, will have one year to comply with the CTA by filing initial reports. Reporting companies created or registered on or after January 1, 2024, will have 30 days upon receipt of their creation or registration documents to file initial reports. FinCEN will be creating an online portal called the Beneficial Ownership Secure System to collect and store reports. Reports filed with FinCEN will not be available to the public or subject to the Freedom of Information Act.

Companies subject to the CTA will be required to provide identifying information for the beneficial owners of the reporting company which is an individual who directly or indirectly either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. The CTA provides factors for determining substantial control (subject to certain exemptions) including: (i) serving as a senior officer of the company, (ii) having authority over senior officers or a majority of the board of directors, (iii) having substantial influence over important decisions, or (iv) having any other type of substantial control over the company.

Companies will be required to report all identifiable information regarding the company as well as the name, DOB, home address, US passport or driver’s license number and an image of the document for each beneficial owner of the company.

Now is the time to review and update your company’s compliance plan and determine if you will be subject to the CTA.

If you have any questions or would like to get more information regarding the Corporate Transparency Act, please contact Batoff Associates, P.A. at 410-864-6211.

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Data Security: Do You Have Adequate Safeguards in Place?

By: Michael P. Sawicki, Esq.

For most companies that deal with confidential information like financial information, proprietary business plans, personal data, health information, or credit card processing, data security should be a top priority. The added complexity of cloud services and flexible work environments have altered how and where your employees connect to the office and where your company’s data resides. It is more important than ever that you protect your digital information from unauthorized access, corruption, or theft throughout its entire lifecycle.

A data security policy describes how a business handles confidential information and personal data. Its primary function is to protect the data and create transparency for the consumer and employees about how their data is processed, protected, and shared. A data security policy regulates the usage, management, and monitoring of data in an organization. Its primary goal is to protect all data used, managed, and stored by a company. Data security policies are typically not required by law, but can help organizations comply with data protection standards and regulations.

Types of data security include hardware security, software security, and legal security. Organizations are legally obliged to protect customer and user data from being lost or stolen or being compromised. Data security is also crucial to preventing the reputational risk to an organization that accompanies a data breach. Legal security can mitigate risk to the company in the event of a data breach.

The Maryland Personal Information Protection Act (MPIPA) was enacted to ensure that Maryland consumers’ personal identifying information is reasonably protected, and if it is compromised, they are notified so that they can take steps to protect themselves. Maryland data privacy laws specifically define what counts as personal information. This includes a Maryland resident’s first and last name or their initials. However, this information must be in combination with one or more of the following:

·  Official ID numbers (e.g., Social Security, passport, driver’s license, or tax identification numbers);

·  Financial numbers (e.g., account, credit card, or debit card numbers);

·  Personal health information, such as details of health insurance policies;

·  Biometric data; and

·  Genetic information.

If there is a security breach, businesses are required to conduct a prompt investigation into the breach and inform affected consumers within 45 days of the breach. Notices must be made to consumers in writing. Any notice must urge the consumer to change his/her passwords and security questions and must detail all compromised information, provide the business’s contact information, and include a statement that informs consumers how they can get advice on preventing identity theft via the Federal Trade Commission and Office of the Attorney General.

Compliance under MPIPA consists of organizations implementing a reasonable level of security to protect personal information. This requires creating, adopting, and maintaining a written security policy. It also requires businesses to take reasonable steps to prevent unauthorized access to personal information.

If you would like to get more information on the creation of a data security policy and speak to an attorney about your needs, please contact Batoff Associates, P.A. at 410-864-6211.

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Trust Decanting Pours Forth Estate Planning Opportunities for Maryland Trusts

By: Joseph M. Fiocco, Esq.

                Are you thinking of modifying a Maryland trust?  Maybe you’re grappling with a drafting mistake or facing an unintended tax consequence.  Starting October 1, 2023, estate planners can use the Maryland Trust Decanting Act to come up with more flexible trust drafting and administration solutions.  Decanting a trust refers to a trustee’s power to distribute all or part of a trust’s assets to a second, often very similar, trust.

                Decanting Benefits

                The trustee does not have to obtain the consent of any interested person, but must only provide sixty days’ notice to those persons, including any person who has the power to remove them as trustee.  The Act allows the trustee to distribute assets to more than one trust, including trusts outside of Maryland.  Even if a trustee’s discretion is limited to distributing assets for the sake of a beneficiary’s health, education, maintenance, or support, the trustee’s decanting power extends to all trust assets.  The Act expressly preserves all marital deductions and charitable deductions for estate tax and gift tax purposes, and preserves the ability for gifts to the trust to qualify for the annual gift tax exclusion.  Decanting has the potential for enhanced administrative benefits, since the Act permits splitting fiduciary powers among trustees, trust protectors, guardians, investment advisors, and other professionals.  The Act particularly supports special needs planning, allowing trustees to decant assets into a special needs trust even if the first trust is not a special needs trust.

                Decanting Limitations

                Decanting cannot generally add new beneficiaries or shift the interests of beneficiaries.  Generally, the second trust has to provide for substantially similar interests to the same beneficiaries as the first trust.  If the trustee is dealing with a charitable interest, they must provide the Attorney General notice of the exercise of the decanting power.  Despite not requiring the consent of interested persons, the Act allows interested persons the opportunity to challenge the exercise of the decanting power in court, regardless of whether they do so outside the sixty day notice period.

                Estate planning requires careful consideration, and clear communication of your objectives with those managing your wealth and those who will inherit your wealth.  It is important to coordinate significant trust modifications with your financial advisor, accountant, and estate planning attorney. When considering a trust modification, you should discuss trust decanting with your estate planning attorney.

                If you would like to speak to an attorney about your trust and estate planning needs, please contact Batoff Associates, P.A. at 410-864-6211.

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