What Are WPA Creditable Benefits?

Executive Summary. Home care agencies in New York are still experimenting with different ways to meet the State's Wage Parity Act ("Act" or "WPA") requirements. The Act requires a minimum basic wage (cash) of the applicable New York State minimum wage plus additional wages or supplemental wages (i.e., benefits) equal to another $4.09 per hour in NYC or $3.22 per hour in Nassau, Suffolk and Westchester counties (the "WPA Package").

Options for WPA Packages. Some agencies prefer to provide the entire required amount as cash wages; that, however, causes the entire amount to be subject to employment taxes, which are an additional cost to the agency but are not creditable against the WPA Package. Other agencies provide some additional cash wages plus some non-taxable benefits, such as minimum value health plan coverage in order to avoid penalties under the Affordable Care Act. Still others provide additional benefits, creating a WPA Package that provides everything from transportation benefits to cell phone plan reimbursements.

Advantages of Benefits vs. Cash. The goal for agencies is to deliver the WPA package in a way that is tax advantaged. When this is done properly, it can be a "win-win" for the agency and the worker. The agency takes an income tax deduction for the actual cost of providing benefits and avoids employment tax costs, plus the entire amount is creditable against the agency's WPA obligation. The worker receives the benefits at no cost and, in most cases, without tax, making the benefits more valuable to the worker than additional cash wages.

Pitfalls with Tax-free Benefits. But this win-win situation for the agency and worker is not always easy to achieve. Not everything qualifies for tax-advantaged treatment - it requires complying not only with the WPA, but also with many other federal and state laws, including the Internal Revenue Code, ERISA, the Affordable Care Act, and wage and hour laws, including the NYS Domestic Workers' Bill of Rights. Each of these laws has specific rules about how benefits must be set-up and operated. Just because a benefit meets the...