Dashboard: Check Out the New Retirement Rules

[Music] welcome to another 21 hats dashboard I'm Lauren Feldman I'm here with Gan marks to talk about the things we think business owners should be following this week welcome Jean hello Lauren how are you I'm great great to have you here glad to be here happy New Year hope your Year's off to a good start so far so good we're only just a few days in but uh we're there so that's good excellent nine days in Jean as usual you've been writing and talking about stuff that matters to business owners this week I want to start with a piece you wrote for the guardian about non-compete clauses which uh the FTC wants to ban there's a lot of support for non-competes among kind of Chamber of Commerce types what do you think um I think non-compete clauses are useless for small businesses you know I um I I even going to the effect of spending the time on Banning them almost seems like a waste of time because you know people include them in employment agreements all the time and and um they get ignored all the time most small businesses like you include them just as a uh you know because it's something to include but I I've never know tells you to yeah it's like well your lawyers tell you to include it and you know it's all part of any standard employment agreement template um I I don't think I've ever had a single client go after an employee for leaving the company that goes to work for a competitor you know um I mean I can understand having it and and there might you know there's probably certain there's definitely case among big businesses that you know if you leave Google to go and work for Microsoft or uh you know something like that you're there there's potentially some intellectual property that you're taking with you that but there is still protection for that right I mean there is and you know you would think that you know you you would you you would have that the issue with the non-competes though is that they they tend to go after the employees you know and you know most the employees that I know you know don't have any money anyway like what what are you going to go after like some guy cuz he's I mean just had this at a at a client that he's a purchasing manager at a client of mine he's a manufacturer and then and he left and then he went to you know to work for a competitors theirs not too far away like in Pennsylvania and um you know they were pissed and you know he has an employment agreement he had an employment agreement and there was an noncompete Clause but they're just like what are you g to do you know we're going to sit there and waste our time and spend attorney fees going after the guy and then even if we get the guy I mean there's no you know you know can do we do we uh you know what money does this guy have what are you GNA get out of him do you know what I mean so what about a situation where like somebody is taking you know client relationships or something like that or you know a list of clients and and information that is proprietary can you do something about that yeah I mean it is certainly it is that you there is that issue that's there but I it kind of speaks for an organization like I'll give an example like in my company um I often get um you know like employees of mine will get offered by clients like hey why don't you do this for me on the side and um we won't tell Jean and I'll just pay you a lower rate you know what I mean and um you know and that that's happened you know you know a few more than a few times um where yeah and the employee will tell me every time because I have good enough relationship with people saying this guy said he wanted to do this and um you know you know it makes you you know pisses you off because you're like what the [ __ ] is this guy you know you know this you know what a j you confront them then what do you do no I haven't really confronted the I you know I thank the employee for doing it um in some cases if it's a really small client I'm like hey you know what if you want to just do this for them on the side I don't really care it's fine you know what I mean like I don't want to it's just not worth my time and and you know if an employee left me to go to work for a you know for um like a competitor um and and we've got our clients I wouldn't even be that um um I think it would be like more full on me like you know if I had say I had an employee and they're like in your example they're working with a bunch of my clients and then they leave and they go to a competitor of mine and they want to you know bring my clients on with them you know if if if the client's relationship is so strong with that employee um and less so with my firm then isn't that more indicative of my failing as a you know as a business owner um of not giving value to that client from a firm perspective like they're so reliant on that one person do you know what I mean like I almost feel like it's you know like I guess I'm not doing my job if one employee can walk away and take clients with them um it's it's more my responsibility to make sure that I'm delivering I've got a relationship with that client and there are other people working with them there's a relationship with the Marx group not just with you know Susan at my company do you know what I mean sure so that's the way I look at it the the argument in favor of non-competes is you know among other things that um you know an employer puts in a lot of time and effort and money and training employees and then they disappear either to start their own business or to go to work for a competitor um you have any sympathy for that argument yeah I mean it it certainly happens I mean my feeling is is that if you're really really good at what you do you shouldn't have to worry about losing clients in that way um I also feel that um if you've got a good employee and they leave you um and they they're going to go and they're going to compete against you um it's going to cause you to up your game that much more um I don't know I don't I I just don't get I don't worry about that kind of [ __ ] you know like if we're really good at what we're doing um as an organization then um I'm not going to be concerned if somebody steals clients or or threatens to to walk away with customers um it's just it's just not on my my priority list of stuff to you know of stuff to do I'd be certainly pissed at it but I think I'd be more pissed on myself than the employee of course I don't think any of this has anything to do with why the FDC and the Biden Administration are interested in doing this I think their sense is is that it's non-compete clauses hold down wages and that this frees up competition and wages will increase because of it do you think that's likely to happen yeah I mean the B Administration is is Pro worker and pro pro employee you know what I mean and they what they want is uh to give employees the ability you're right to move and to increase their their livelihood and to do better for themselves and they feel that that employees are limited from doing this because of these you know of a non-compete agreement so you know I mean I can understand that you know why they're why they're out to do that I just kind of feel like you you you pick your battles and um I'm not sure who's going to who's going to step up and back ble this with the FTC I suspect it'll be bigger companies large you know maybe yeah big tech companies you know you know what I'm saying like you know like Elon Musk could be pretty pissed if like one of his key employees from Tesla leaves to go to a competing auto manufacturer that's trying to develop battery powered vehicles do you know what I mean like that's tough for companies of that size but for smaller businesses like mine I just it just is I don't think it's just something that I would even want to battle over so we we should specify this has not actually happened this is a proposal there'll be um a comment period and then a final decision which could take quite a bit of time I suspect and then and then there'll be litigation yeah then there'll be litigation against it so it's going to take a while like anything else for this to you know to to come to fruition but I I think as as a business owner you should walk away knowing that the writing is on the wall that your non-compete agreement and this been talked about for a while this is not like new news I actually thought the the deal was going to be the one to lead this charge not the FTC so um you know so we've been telling our clients that have this non-competent employee employee agreements like you shouldn't you know I wouldn't give too much weight to them they're not protecting you that much got it all right next topic you recently wrote for the Philadelphia inquir about a new federal law that will affect retirement plans for small businesses uh what they can offer their employees what did you find there yeah this is huge laar I mean it's it's called secure 2.0 it was part of the uh Omnibus spending bill that passed at the very end of uh 2022 so it's it's very you know very recent just a couple weeks ago right and it is um it Carries On from the secure Act of 2019 and um what it's trying to do is it's trying to address retirement savings um and to encourage both business owners and employees to put more money away for retirement and there is some pretty huge things coming in the next you know four or five years as part of this act that you you know if you're if you're a business owner you really need to make sure you're aware of for example starting in 2025 you will be required required to um withhold money um and and you commit you put money into put your employees money into a 401k plan have it's called automatic enrollment in a 401k 3% of their compensation now your employees can opt out of that but as an employer um you're going to have that sort of mandate to do that initially for any new employees um now you know you know I I want to be just clear that um the more that your employees put away into their retirement plans the more you can put away into your 401k plan right that's a tricky thing that I think a lot of people might not understand explain how that works yeah if you have a 401k plan in your business there's only a certain amount you can contribute before you fail these discrimination tests which basically means that as a highly compensated or an owner of the company you're only allowed to contribute a certain amount relative to what your employees are contributing um those discrimination tests are designed so that you can encourage your employees to contribute more so the more they contribute the idea is so that it's not just valuable to the highest paid employees or or the owner of the business but also to lower level employees correct which is as a business owner you should be looking at the secure 2.0 um Provisions because there's all sorts of things that are encouraging employees to put money in their 401ks like this automatic enrollment um and the more they do put it away the more that you will you know you'll be able to put away as well there's some other things in the secure 2.0 which is really of real interest for starters um it it gives you it will Almost 100% uh reimburse you for starting up a 401k plan through tax credits over three years so if you're whining and moaning about the cost of setting up a 401k plan the administrative cost yeah you can shut up at this point because the government will for doing it so nice try there the other thing that it does is for your younger employees that are paying down their student loans um if they provide documentation to you of what they paid down during the year their student loan you can put a matching contribution now into their 401k plan based on they say they they paid down on their student loans and it's pre-taxed they don't get taxed on it and you get a deduction for doing it so you can say to them hey we can still help you out with retirement to get a tax benefit for doing that um just because you're not putting money in your retirement plan because you're spending it to pay down your student loans we can still help you out you know by doing that there's another thing in this uh in this secure Lauren that it's really wild for like five years you'll be you can get up to like a, tax credit per employee for when you contribute when you match any of their contributions for five years so as an employee contributes to a 401k and if you match their contribution up to $1,000 the government will credit you back that money they're literally paying for you to match that employes contribution that is like [ __ ] amazing you know so all of these things are designed and there's more there's more it's up to $ thousand dollar so I just want to be clear on how much an employee can put in more than that you can match more than that but the limit on what the government is going to credit you for is $1,000 that is correct that is exactly right so but you can you know that you still get a th000 bucks but it's per employee so y that's a significant amount of money what's fascinating about that is the government is um whoever designed this there are a few Senators that were very uh Rob Portman was one of them uh Senator weiden as well who I interviewed him for another podcast both of them actually they um they're they're smarter than you think for politicians because one one thing any business owner will tell you is that once you start a benefit you cannot take it away you know what I mean so um if you start to match your employees contributions because you're getting reimbursed by the government over you know the next five years when that reimbursement ends it's not like you're going to stop matching because your employee expects that benefit at that point you know so it's kind of like a sneaky way to get you the business owner into the habit of matching your employees contribution and then carrying it on even after the credit you know expires um which is fine it's a good benefit to provide um listen like I said earlier the more your employees contribute the more you can contribute and I have more than a handful of clients Lauren that um they they have older employees that wanted to retire didn't put enough money away for retirement and now the business owner has got to kind of continue them on you know in some way or form even when they're not really that needed um because you know you're loyal to your employees and you want to treat them well but it's it's a bit of a burden so now the government with secure 2.0 is trying to give all these incentives to put money away for retirement so we don't have to be faced with that situation so my advice is talk to your payroll company talk to your accountant talk to your lawyer um really get familiar with secure 2.0 and make sure you're offering these benefits because your competitor is going to be offering them so you might as well make sure you're up to speed does this apply to all businesses or uh are there smaller businesses that don't meet a threshold and aren't affected by any of this different there are different rules depending on the Provisions like for example that um automatic enrollment thing if you have less than 10 employees for example or you're a startup you don't need to do the automatic enrollment thing you know um the uh the contributions uh that that I mentioned depends on what those employees are contributing and also the size of your business so different things apply to different Siz businesses I can tell you one thing whenever I mention tax credits though they do apply to both profits and nonprofit businesses you can take the credit against your payroll taxes so so you know all all of that is there so these are all it depends I guess is my answer interesting though yeah it's really good last topic uh you've heard previously about a new IRS rule that's going to complicate the use of third-party payment platforms uh that rule was set to go in effect this month I believe uh but it's now been put on hold for a year can you take us through that quickly yeah very quickly it's just that if you're say you're a you're a vendor uh you're an artist and you go to a bunch of different uh you know art shows or whatever and you sell your paintings and you use ven mode to do that you know or one of the other platforms or one of the other zel you know PayPal all these other right cash app you know for people that are paying you 200 bucks 300 bucks you know whatever they don't have to send you a $199 if it's under $600 so theoretically uh you know you might forget to report that to the IRS right hopefully not but you might forget what can I say it probably happens it could happen right so now the IRS is saying all right well to stop that from happening we're gonna have venmo report to us the IRS and also report to you all the cash receipts that they processed on your behalf as long as they're under $600 it used to be a much higher amount so that means that $600 per item is $600 total per year right yeah so you know you might have had you know you $100 transactions with people you know as long as you're run 600 bucks you're going to get saying venmo is going to send you a $199 saying we've got you know the you know a total amount that was your processed through us this year um and so that's going to also get reported to the IRS and therefore no sneaking around you know so everybody's like whining and moaning about it you know this it's because it's going to be um more paper work that that has to be tracked and I guess there is some some you tress to that but it is um I mean it's it's designed to try and catch those people that aren't reporting their taxes so uh you know fair enough uh my biggest issue with it earlier this year I didn't see it as much as I thought but maybe we'll see it again in 2023 is just um a lot of scamsters getting involved because um PayPal venmo uh zel cash app they might not have all of your information so you know they might be reaching out to you saying hey we have to send you a 1099 at the end of the year we need your social security number we need your EIN number so someone else could do the same thing and you think it's them that's right and so I was I thought I'd be seeing more of that the second half of this year maybe the people that do that kind of stuff were so busy uh with you know um employment retention tax credit fraud and other you know schemes that they they ignored this but just be careful like keep an eye out in 2023 if you get a message from you know uh that seems like it's coming from PayPal or venmo or zel or cash app or whatever asking you for this information to update their records uh be really really uh Vigilant about that uh you don't want to give that through an email you're just you want to do that through their website don't click on their Link in an email if PayPal is asking you to update records then fine go to paypal.com and go to your account there and update it there not through an email so just to be clear uh there's a a one-year reprieve the IRS is not requiring the payment platforms to send out the forums this year uh but that doesn't mean you're not supposed to pay taxes on that money earned correct never and it never did okay I don't know what you're doing with your cash app but I'm paying my taxes okay I pay all my taxes Gan what are you uh anything you're working on this week that we should know about and look for yeah I've you know I I'm I wrote a piece that'll come out in the guardian uh that that should be out this week um about I'm lamenting the um the decline of using paper checks you're lamenting it yeah it was uh it was an Ode to paper checks why I'm so sorry to be seeing them go which might give you a chuckle because it's you know it's really it's really targeted at older people that are used to using paper checks so that's coming out this week and I'm also going to write a piece uh for the inquire this week about um Microsoft Office I I pulled a bunch of my tech technology friends say give me some tips on um little known features and things in Microsoft Office that uh we might not know about that could make us more productive so um I'm looking forward to accumulating all those together and writing about those excellent interesting all right Gan marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes and entrepreneur the Chicago Daily Herald come on it's a growing publication you could also hear I'm on ABC radio's eye on the world with John Bachelor Jee host two small business podcast with paychecks Corporation and the Hartford thank you Jean thank you Lauren it's great talking to you we will talk to you actually I'm going to be back in two weeks we'll talk to you you're going to be traveling I will be traveling so when I get back we'll talk okay sounds great have a great trip and we will talk soon have a great week everybody [Music]