Employee Benefit Plan Changes Taking Effect in 2025

As 2025 starts and the transition to the new administration in D.C. commences, change is inevitable. This year, there are new employee benefit plan provisions taking effect driven by existing laws such as the Employee Retirement Income Security Act of 1974 (ERISA) and the Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE 2.0). Here, we will review those changes and offer additional insight.

Mandatory automatic enrollment for new plans

SECURE 2.0 established new requirements for new 401(k) and 403(b) plans adopted after December 29, 2022. As of January 1, 2025, employers must automatically enroll eligible employees into these plans with an initial deferral percentage that is between 3% and 10% of compensation. Automatic contributions escalate by at least 1% per year up to a deferral rate of at least 10% but not more than 15% (10% until January 1, 2025). Participants can opt out of automatic enrollment or automatic escalation at any time.

The following may be exempt from the new requirements:

Plans in effect on or before December 29, 2022.
Organizations in existence for less than three years.
Businesses with fewer than 10 employees.
Church and governmental plans.

Catch-up contribution increases

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) first introduced catch-up contribution provisions as a way to help older workers increase retirement savings. Under EGTRRA, plan sponsors could voluntarily amend their plans to allow participants aged 50 and older to contribute additional amounts to their 401(k), 403(b), and 457(b) plans. Prior to December 31, 2024, catch-up contributions to these plans were limited to $7,500, as indexed.

For taxable years beginning after December 31, 2024, those contribution limits change. Participants aged 60 to 63 may make additional contributions of either (i) $11,250 or (ii) 150% of their 2024 contribution limit, as indexed for inflation after 2025.

For SIMPLE IRA plans, before December 31, 2024, participants in SIMPLE IRA plans that allow catch-ups could contribute up to $3,500, as indexed. In 2025, such contributions rely on the participant’s age (50 to 59, or age 64 or older on December 31, 2025) and the company’s number of employees. Depending on these factors, a participant’s contributions above regular deferrals can total between $3,850 and $5,250.

Coverage of long-term part-time employees

The original SECURE Act required employers to include certain part-time employees in their 401(k) plans. To be eligible, the employee must have worked at least 500 hours per year for at least three consecutive years and must be at least 21 years old as of the end of that three-year period. The employee also would earn vesting credits for all years with at least 500 hours of service.

SECURE 2.0 reduces the three-year period to two years for plan years beginning after December 31, 2024. However, service performed before January 1, 2021, is disregarded for both eligibility and vesting purposes.

Although SECURE 2.0 extends this rule to apply to 403(b) plans that are subject to ERISA, the rule does not apply to union plans or defined benefit plans.

Distributions for certain long-term care premiums

Plan participants may receive distributions of up to $2,500 per year to pay for quality long-term care insurance without triggering the 10% early withdrawal penalty that might otherwise apply. This optional change for plan sponsors becomes effective for distributions made after December 29, 2025.

The lost and found database

Retrieval or management of retirement funds can be complicated when workers move from job to job. To help reunite participants and their missing retirement plans, SECURE 2.0 required the Employee Benefits Security Administration to provide a search tool or database of benefits by December 29, 2024. At this time, participation is voluntary, with some groups expressing concern about the breadth of information initially requested by the Department of Labor to populate the database.

Is your plan ready for 2025?

By staying informed and prepared, plan sponsors can navigate these changes effectively. Plan sponsors should proactively review and adjust their plans accordingly to ensure compliance with these new mandates.

If you have questions about the compliance of your plan or would like more detailed guidance, contact our Employee Benefit Plan Audit team for more assistance.

When selling business assets, understanding the tax implications is crucial. One area to focus on is Section 1231 of the Internal Revenue Code, which governs the treatment of gains and losses from the sale or exchange of certain business property.

Business gain and loss tax basics

The federal income tax character of gains and losses from selling business assets can fall into three categories:

Capital gains and losses. These result from selling capital assets which are generally defined as property other than 1) inventory and property primarily held for sale to customers, 2) business receivables, 3) real and depreciable business property including rental real estate, and 4) certain intangible assets such as copyrights, musical works and art works created by the taxpayer. Operating businesses typically don’t own capital assets, but they might from time to time.
Sec. 1231 gains and losses. These result from selling Sec. 1231 assets which generally include 1) business real property (including land) that’s held for more than one year, 2) other depreciable business property that’s held for more than one year, 3) intangible assets that are amortizable and held for more than one year, and 4) certain livestock, timber, coal, domestic iron ore and unharvested crops.
Ordinary gains and losses. These result from selling all assets other than capital assets and Sec. 1231 assets. Other assets include 1) inventory, 2) receivables, and 3) real and depreciable business assets that would be Sec. 1231 assets if held for over one year. Ordinary gains can also result from various recapture provisions, the most common of which is depreciation recapture.

Favorable tax treatment

Gains and losses from selling Sec. 1231 assets receive favorable federal income tax treatment.

Net Sec. 1231 gains. If a taxpayer’s Sec. 1231 gains for the year exceed the Sec. 1231 losses for that year, all the gains and losses are treated as long-term capital gains and losses — assuming the nonrecaptured Sec. 1231 loss rule explained later doesn’t apply.

An individual taxpayer’s net Sec. 1231 gain — including gains passed through from a partnership, LLC, or S corporation — qualifies for the lower long-term capital gain tax rates.

Net Sec. 1231 losses. If a taxpayer’s Sec. 1231 losses for the year exceed the Sec. 1231 gains for that year, all the gains and losses are treated as ordinary gains and losses. That means the net Sec. 1231 loss for the year is fully deductible as an ordinary loss, which is the optimal tax outcome.

Unfavorable nonrecaptured Sec. 1231 loss rule

Now for a warning: Taxpayers must watch out for the nonrecaptured Sec. 1231 loss rule. This provision is intended to prevent taxpayers from manipulating the timing of Sec. 1231 gains and losses in order to receive favorable ordinary loss treatment for a net Sec. 1231 loss, followed by receiving favorable long-term capital gain treatment for a net Sec. 1231 gain recognized in a later year.

The nonrecaptured Sec. 1231 loss for the current tax year equals the total net Sec. 1231 losses that were deducted in the preceding five tax years, reduced by any amounts that have already been recaptured. A nonrecaptured Sec. 1231 loss is recaptured by treating an equal amount of current-year net Sec. 1231 gain as higher-taxed ordinary gain rather than lower-taxed long-term capital gain.

For losses passed through to an individual taxpayer from a partnership, LLC, or S corporation, the nonrecaptured Sec. 1231 loss rule is enforced at the owner level rather than at the entity level.

Tax-smart timing considerations

Because the unfavorable nonrecaptured Sec. 1231 loss rule cannot affect years before the year when a net Sec. 1231 gain is recognized, the tax-smart strategy is to try to recognize net Sec. 1231 gains in years before the years when net Sec. 1231 losses are recognized.

Conclusion

Achieving the best tax treatment for Sec. 1231 gains and losses can be a challenge. We can help you plan the timing of gains and losses for optimal tax results.

Health Savings Accounts (HSAs) have become popular employer-sponsored fringe benefits. How popular? According to the most recent data from the U.S. Bureau of Labor Statistics, 51% of private industry workers in 2023 had access to the high-deductible health plans (HDHPs) that must be sponsored in conjunction with HSAs.

The funny thing about HSAs is, though widely offered, they’re often suboptimally used. If your organization sponsors an HDHP with HSAs, you can help participants get more from their accounts. And if it doesn’t, read on for some insights into this potentially valuable fringe benefit.

More than meets the eye

HSAs are participant-owned, tax-advantaged accounts used to accumulate funds for eligible medical expenses. As mentioned, an HSA must be offered along with an HDHP, which is defined in 2025 as a plan with at least a $1,650 deductible for self-only coverage or $3,300 for family coverage. Also in 2025, participants can contribute pretax income of up to $4,300 for self-only coverage and $8,550 for family coverage.

Account holders generally fail at “optimal utilization” in a couple of ways. First, some simply don’t contribute enough funds to fully cover medical expenses throughout the year. This may be because of financial constraints, unexpectedly high health care costs or a lack of understanding of how HSAs work.

Second, many participants overlook the fact that HSAs are not only medical savings accounts, but also retirement savings accounts. That’s right; employers can set up accounts to include investment options that can generate interest on designated account funds. And because participants own their accounts, they can keep building their balances no matter where or whether they work.

Under traditional qualified retirement plans, such as 401(k)s and IRAs, contributions and accumulated investment returns are taxable upon withdrawal. HSA distributions, however, are nontaxable so long as funds are used for qualified expenses, which are surprisingly broad. Plus, as is also the case with employer-sponsored traditional 401(k)s and IRAs, HSA contributions occur pretax via paycheck deferrals.

When HSA distributions are used for ineligible expenses, they’re subject to a 20% tax penalty plus federal income taxes at the account holder’s ordinary rate. That 20% penalty, however, disappears when account holders turn 65, though nonmedical expenses from age 65 onward remain subject to regular federal income tax.

Even when compared with Roth 401(k)s or Roth IRAs, HSAs land in a favorable light. Although Roth distributions are tax-free at the federal level, Roth contributions aren’t tax-deductible. Direct HSA contributions are deductible and, again, paycheck deferrals happen pretax — lowering participants’ taxable income.

3 ways to help

Employers may use various approaches to help HSA participants get more from their accounts. These include:

1. Providing basic education and reminders. Be sure your benefits materials and communications are accurate, thorough and clearly written. Employees should have access to a reader-friendly description of what an HSA is and how it works. Throughout the year, issue regular reminders about using the accounts and recognizing their value as savings vehicles.

2. Considering matching strategies. Just as employers can match 401(k) contributions, they may match HSA contributions. And there are some creative ways to do so. For example, you could amend your 401(k) plan so participants get a 50% match on their combined 401(k)-HSA deferrals. However, consult a qualified benefits advisor before making any plan design changes.

3. Adding or updating investment options. If your current HSAs don’t have investment options, explore adding them. Examples include money market funds, stocks and mutual funds, and bonds or bond funds. You may need to update your investment options periodically. Again, work with a qualified advisor when undertaking these steps.

Costs, risks and upsides

The HDHP plus HSAs model is popular because it offers advantages for both employers and participants. However, that doesn’t mean it’s right for every organization. Contact us for help identifying and assessing the costs, risks and potential upsides of any fringe benefits you’re administering or considering.

Yeo & Yeo, a leading accounting, technology, medical billing, wealth management, and advisory firm, has acquired Amy Cell Talent (ACT). Effective January 1, 2025, ACT will be rebranded as Yeo & Yeo HR Advisory Solutions (YYHR), with Amy Cell assuming the role of President.

“We are excited to welcome Amy Cell Talent’s professionals to the Yeo & Yeo team,” said David Youngstrom, Yeo & Yeo’s President & CEO. “This partnership enhances our ability to meet our clients’ HR needs, helping them succeed in new and exciting ways.”

Amy Cell brings a wealth of experience to her role as President of Yeo & Yeo HR Advisory Solutions. She began her career as a CPA with Plante Moran before transitioning into HR, where she held pivotal roles, including Vice President of Talent Enhancement and Entrepreneurial Education at Ann Arbor SPARK and Senior Vice President of Talent Enhancement at the Michigan Economic Development Corporation. Nearly ten years ago, she founded Amy Cell Talent, successfully building a team of over 25 HR professionals and earning an outstanding reputation throughout Southeast Michigan and beyond. ACT is a Gold Resource Partner with the Michigan Council of the Society for Human Resource Management, has been recognized as an Ann Arbor SPARK FastTrack Award winner, and one of Michigan’s Small Business 50 Companies to Watch.

“Joining Yeo & Yeo marks an exciting new chapter for our company,” said Cell. “From the start, it was clear that we share the same core values—putting people first, fostering trust, and striving for excellence in everything we do. What excites me most is the opportunities it creates for our clients. With Yeo & Yeo’s breadth of expertise and resources, we can offer more comprehensive, innovative solutions than ever.”

Since 2015, Amy Cell Talent has specialized in delivering tailored HR solutions to businesses, nonprofits, municipalities, and job seekers across Michigan. Based in Ypsilanti at the SPARK East Innovation Center, the firm is known for its expertise in workforce development and personalized HR services. As part of Yeo & Yeo’s ongoing growth, more than 20 of Amy Cell Talent’s HR professionals will join the firm under its newly formed fifth entity, Yeo & Yeo HR Advisory Solutions. This expansion allows Yeo & Yeo to offer a comprehensive suite of HR and recruiting services, including compensation planning, employee training and coaching, policy development, payroll management, employee engagement and retention strategies, and recruiting. With the addition of these specialized services, Yeo & Yeo continues to strengthen its commitment to meeting the diverse needs of its clients.

“A lot is happening in the HR landscape right now, including changes to Michigan minimum wage laws and earned sick time,” said Cell. “Yeo & Yeo HR Advisory Solutions is here to help our clients navigate these complexities and solve their HR challenges with confidence.”

Learn more about Yeo & Yeo HR Advisory Solution’s services at yeoandyeo.com/hr-advisory-solutions.

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In a surprising turn of events, a federal appeals court has issued another ruling that suspends a requirement for businesses to file reports about their beneficial ownership information (BOI). This came just days after the same court issued a ruling that resulted in the federal government announcing that millions of small businesses did have to file BOI reports by January 13, 2025.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) immediately announced: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Bottom line: If your business was concerned about the deadline, or rushing to meet it, you can relax for now. Business groups, including the National Federation of Independent Business (NFIB) applauded the latest decision. In a press release, the NFIB stated that since small businesses were told that they needed to “urgently submit” BOI reports, they “have experienced enormous chaos and confusion.”

What the requirements are intended to accomplish

The BOI requirements were imposed under the Corporate Transparency Act (CTA). They’re intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud. The CTA mandated many small businesses to provide information about their “beneficial owners” (the individuals who ultimately own or control the businesses) to FinCEN. Failure to submit a BOI report by the applicable deadline would have resulted in civil or criminal penalties, or both.

FinCEN estimated that approximately 32.6 million companies would be affected by the reporting rules in the first year.

Timeline of the requirements

To help explain the head-spinning situation, here’s a timeline of some significant events.

January 1, 2021: The Corporate Transparency Act is enacted.

January 1, 2024: BOI reporting requirements begin to take effect. Initial BOI reports for companies formed or registered prior to 2024 have one year to file reports. Those that register on or after January 1, 2024, have 90 days to file upon receipt of their creation or registration documents and those that register on or after January 1, 2025, have 30 days to file upon receipt of their creation or registration documents.

December 3, 2024: The U.S. District Court for the Eastern District of Texas enters an order suspending nationwide enforcement of the CTA and its BOI reporting requirements. The court challenges the constitutionality of the CTA. (However, in other cases, district courts have upheld the CTA and its requirements.)

December 5, 2024: The government appeals the December 3 district court ruling.

December 6, 2024: FinCEN announces in an alert: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

FinCEN states that it believes the CTA is constitutional.

December 23, 2024: The U.S. Court of Appeals for the Fifth Circuit again allows the nationwide enforcement of the CTA and the BOI reporting requirements. FinCEN announces in another “alert” that reporting companies formed or registered prior to 2025 have until January 13, 2025, to file a BOI report (rather than the original January 1, 2025, deadline).

December 26, 2024: The Fifth Circuit vacates the stay and reinstates a nationwide preliminary injunction enjoining (or prohibiting) the government from enforcing the CTA.

December 27, 2024: FinCEN announces in another “alert” that reporting companies aren’t currently required to file BOI reports in January. The Fifth Circuit announces a schedule to address the “weighty substantive arguments” again, beginning in February 2025.

What the future could hold

As you can see by the latest announcement from the appeals court, the ongoing saga of the BOI reporting requirements isn’t necessarily finished. In addition to the court potentially changing the rules again, there could be legislation repealing the reporting requirements when Republicans take control of Congress in the new year. Contact us if you have questions or want to file a BOI report voluntarily.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, announces the relocation of its Southeast Michigan offices to a new location in Troy, Michigan. The professionals in Yeo & Yeo’s Auburn Hills office and Bloomfield Hills office, formerly the practice of Berger, Ghersi & LaDuke, who joined Yeo & Yeo in July 2024, have relocated to the new Troy office, effective January 2, 2025.

“Merging the two offices brings together a talented team of over 30 professionals in one unified space, which has become the firm’s second-largest office,” said Dave Youngstrom, President & CEO of Yeo & Yeo. “With this move, we can deliver even greater value to our clients as our people work to help them achieve their goals.”

The Troy office, located on the fourth floor of the Troy Corporate Center II at 880 W. Long Lake Road, Suite 400, spans 14,000 square feet. Employees will have access to modern amenities such as a gym, micro market, and conference center within the Troy Corporate Center.

“Our new office reflects our commitment to growth in Southeast Michigan,” said Principal and Yeo & Yeo board member Tammy Moncrief. “Last year, Yeo & Yeo welcomed 50 new hires firm-wide. This space positions us for future expansion while creating opportunities for collaboration and connection among colleagues.”

Troy Cafe

Yeo & Yeo has nine offices throughout Michigan and solves clients’ challenges through its four interconnected companies: Yeo & Yeo CPAs & Advisors, Yeo & Yeo Medical Billing & Consulting, Yeo & Yeo Technology, and Yeo & Yeo Wealth Management. Most recently, Yeo & Yeo expanded its service offerings, establishing a new human resource and talent acquisition entity, Yeo & Yeo HR Advisory Solutions.

“Yeo & Yeo has grown considerably, expanding our team of professionals and our services,” said Principal Alan LaDuke. “While our location has changed, our commitment to our clients and the community remains. We’re proud of the relationships we’ve built over the years and look forward to continuing to provide support and make a meaningful impact on those we serve.”

Yeo & Yeo’s professionals are excited to welcome clients to the new space, and the firm plans to host its annual Summer Leadership Program, a two-day public accounting firm experience for undergraduate accounting students, at the Troy office in May.

On December 23, 2024, a federal Court of Appeals lifted a preliminary injunction on the Beneficial Ownership Information (BOI) filing requirements, allowing FinCEN to enforce BOI reporting.

Reporting companies must file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, it has extended the reporting deadline as follows:

For companies created or registered before 2024, the filing deadline was extended from December 31, 2024, to January 13, 2025.
For companies created or registered on or after September 4, 2024, the filing deadline was extended from December 3, 2024, to January 13, 2025.
For companies created or registered on or after December 3, 2024, and on or before December 23, 2024, the filing deadlines were extended an additional 21 days from the regular filing deadlines.
Companies that qualify for disaster relief may have deadlines extended beyond January 13, 2025. These companies should follow whichever deadline is later.
Companies created or registered in the United States on or after January 1, 2025, have 30 days to file their initial reports after receiving notice that their creation or registration is effective.

Companies should work with their legal counsel to determine their filing obligations under the new BOI reporting rules. The Corporate Transparency Act is a separate federal law that is not part of the tax code. Assessing the reporting requirements and identifying beneficial ownership interests may necessitate legal advice. As such, Yeo & Yeo will not assist with determining filing obligations or filing the BOI report.

Where can you learn more?

Refer to the following resources to learn more about BOI reporting:

Visit fincen.gov/boi and sign up for FinCEN updates to receive immediate email updates on BOI reporting.
FinCEN’s five-minute video, How to File a BOI Report
Contact your attorney or legal counsel with expertise in this area for additional guidance.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, is pleased to announce the promotion of Zaher Basha, CPA, CM&AA, to Principal effective January 1, 2025.

Basha joined Yeo & Yeo in 2014, distinguishing himself through his knowledge of tax planning and preparation, business advisory services, business valuation, and mergers and acquisitions. His commitment to delivering five-star client service has solidified his reputation as a trusted advisor across a range of industries, especially healthcare and mid-size businesses. In addition, Zaher holds the Certified Merger & Acquisition Advisor (CM&AA) credential and his knowledge benefits the firm’s clients through all aspects of the merger and acquisition process, from due diligence and financial modeling to business valuation, negotiations, and transaction closing.

Zaher has been recognized throughout his tenure for his professional achievements and dedication to the firm’s values. Notably, he received Yeo & Yeo’s Spirit of Yeo award in 2019, underscoring his commitment to helping his clients, team, and community thrive. His passion for mentorship and leadership has fostered growth within the firm, inspiring colleagues and contributing to a culture of collaboration and innovation.

“Zaher’s promotion to Principal is a testament to his exceptional work ethic, unwavering commitment to his clients, and the positive impact he has made on our team,” said Dave Youngstrom, President & CEO of Yeo & Yeo. “We look forward to his continued leadership and the contributions he will bring to the firm and the Principal group.”

Basha holds a Master of Business Administration from Walsh College and is based in Yeo & Yeo’s Troy office. He is active in various professional organizations, including the Michigan Association of Certified Public Accountants’ Healthcare Task Force and the Alliance of Merger & Acquisition Advisors. He contributes significantly to the firm’s strategic initiatives, helping implement new technology to improve internal staff efficiency and the client experience. In the community, he serves as treasurer of the Syrian American Rescue Network. He also volunteers for the Syria Institute and participates in various Auburn Hills and Troy Chambers of Commerce events.

Yeo & Yeo congratulates Zaher Basha on his promotion to Principal and looks forward to his continued success.

Owners’ equity is the difference between the assets and liabilities reported on your company’s balance sheet. It’s generally composed of two pieces: capital contributions and retained earnings. The former represents the amounts owners have paid into the business and stock repurchases, but the latter may be less familiar. Here’s an overview of what’s recorded in this account.

Statement of retained earnings

Each accounting period, the revenue and expenses reported on the income statement are “closed out” to retained earnings. This allows your business to start recording income statement transactions anew for each period.

Retained earnings represent the cumulative sum of your company’s net income from all previous periods, less all dividends (or distributions) paid to shareholders. The basic formula is:

Retained earnings = Beginning retained earnings + net income − dividends

Typically, financial statements include a statement of retained earnings that sums up how this account has changed in the current period. Net income (when revenue exceeds expenses) increases retained earnings. Conversely, dividends and net losses (when expenses exceed revenue) reduce retained earnings.

Significance of retained earnings

Lenders, investors and other stakeholders monitor retained earnings over time. They’re an indicator of a company’s profitability and overall financial health. Moreover, retained earnings are part of owners’ equity, which is used to compute certain financial metrics. Examples include:

Return on equity (net income / owners’ equity),
Debt-to-equity ratio (total liabilities / owners’ equity), and
Retention ratio (retained earnings / net income).

A business borrower may be subject to loan covenants based on these ratios. Care must be taken to stay in compliance with these agreements. Unless a lender waives a ratio-based covenant violation, it can result in penalties, higher interest rates or even default.

Retained earnings management

Profitable businesses face tough choices about allocating retained earnings. For example, management might decide to build up a cash reserve, repay debt, fund strategic investment projects or pay dividends to shareholders. A company with consistently mounting retained earnings signals that it’s profitable and reinvesting in the business. Conversely, consistent decreases in retained earnings may indicate mounting losses or excessive payouts to owners.

Managing retained earnings depends on many factors, including management’s plans for the business, shareholder expectations, the business stage and expectations about future market conditions. For example, a strong retained earnings track record can attract investment capital or potential buyers if you intend to sell your business.

Warning: Excessive accumulated earnings can lead to tax issues, particularly for C corporations. Federal tax law contains provisions to prevent corporations from accumulating retained earnings beyond what’s reasonable for business needs. We can prepare detailed business plans to justify an accumulated balance and provide guidance on reasonable dividends to avoid IRS scrutiny.

For more information

Many companies consider dividend payouts and plan investment strategies at year end. We can help determine what’s appropriate for your situation and answer any lingering questions you might have about your business’s statement of retained earnings.

Intangible assets, such as patents, trademarks, copyrights and goodwill, play a crucial role in today’s businesses. The tax treatment of these assets can be complex, but businesses need to understand the issues involved. Here are some answers to frequently asked questions.

What are intangible assets?

The term “intangibles” covers many items. Determining whether an acquired or created asset or benefit is intangible isn’t always easy. Intangibles include debt instruments, prepaid expenses, non-functional currencies, financial derivatives (including, but not limited to, options, forward or futures contracts, and foreign currency contracts), leases, licenses, memberships, patents, copyrights, franchises, trademarks, trade names, goodwill, annuity contracts, insurance contracts, endowment contracts, customer lists, ownership interests in any business entities (for example, corporations, partnerships, LLCs, trusts and estates) and other rights, assets, instruments and agreements.

What are the expenses?

Some examples of expenses you might incur to acquire or create intangibles that are subject to the capitalization rules include amounts paid to:

Obtain, renew, renegotiate or upgrade business or professional licenses,
Modify certain contract rights (such as a lease agreement),
Defend or perfect title to intangible property (such as a patent), and
Terminate certain agreements, including, but not limited to, leases of tangible property, exclusive licenses to acquire or use your property, and certain non-competition agreements.

IRS regulations generally characterize an amount as paid to “facilitate” the acquisition or creation of an intangible if it’s paid in the process of investigating or pursuing a transaction. The facilitation rules can affect any business and many ordinary business transactions. Examples of costs that facilitate the acquisition or creation of an intangible include payments to:

Outside counsel to draft and negotiate a lease agreement,
Attorneys, accountants and appraisers to establish the value of a corporation’s stock in a buyout of a minority shareholder,
Outside consultants to investigate competitors in preparing a contract bid, and
Outside counsel for preparing and filing trademark, copyright and license applications.

Why are intangibles so complex?

IRS regulations require the capitalization of costs to:

Acquire or create an intangible asset,
Create or enhance a separate, distinct intangible asset,
Create or enhance a “future benefit” identified in IRS guidance as capitalizable, or
“Facilitate” the acquisition or creation of an intangible asset.

Capitalized costs can’t be deducted in the year paid or incurred. If they’re deductible, they must be ratably deducted over the life of the asset (or, for some assets, over periods specified by the tax code or under regulations). However, capitalization generally isn’t required for costs not exceeding $5,000 and for amounts paid to create or facilitate the creation of any right or benefit that doesn’t extend beyond the earlier of 1) 12 months after the first date on which the taxpayer realizes the right or benefit or 2) the end of the tax year following the tax year in which the payment is made.

Are there any exceptions to the rules?

Like most tax rules, these capitalization rules have exceptions. Taxpayers can also make certain elections to capitalize items that aren’t ordinarily required to be capitalized. The examples described above aren’t all-inclusive. Given the length and complexity of the regulations, transactions involving intangibles and related costs should be analyzed to determine the tax implications.

For assistance and more information

Properly managing the tax treatment of intangible assets is vital for businesses to maximize tax benefits and ensure compliance with tax regulations. Contact us to discuss the capitalization rules and determine whether any costs you’ve paid or incurred must be capitalized, or whether your business has entered into transactions that may trigger these rules. You can also contact us if you have any questions.

Business email compromise (BEC) has emerged as one of the most financially damaging online crimes. According to the FBI’s Internet Crime Complaint Center (IC3), organizations lost nearly $56 billion across approximately 305,000 incidents between October 2013 and December 2023. Increasingly, gift cards are playing a key role in BEC scams.

Understanding how these schemes work can help prevent them from harming your business.

Role of gift cards

To steal from companies, BEC perpetrators use social engineering and computer intrusion techniques. Their goal is to trick email users into transferring funds to them. Although several BEC variations are active, cybercriminals usually impersonate senior executives and target lower-level employees by asking workers to fulfill what might seem like routine requests. These include sending money via wire or writing a check.

In recent years, gift cards have assumed a prominent role in these scams. Unlike wire transfers, for which most companies and financial institutions have extensive security protocols, gift card transactions generally encounter little scrutiny. Gift cards, after all, are designed to be easy to buy and use.

Common schemes

In a typical BEC scheme, an employee might receive an email from the company’s “CEO” instructing the worker to purchase gift cards for a vendor and to mail them the same day. The fraud perpetrator typically promises to reimburse the employee who buys the gift cards. To ensure a scheme isn’t detected quickly enough, con artists may ask employees to expedite shipment of gift cards via a delivery service.

Fraudsters, posing as executives, perpetrate a similar scheme by asking employees to email them information for each gift card purchased — including security codes if they’re printed on the cards — or to send photographs of the front and back of each card. The thief promises to personally email the vendor or other intended recipient with the card information.

Of course, digital gift cards can be redeemed by crooks even faster than physical cards. So a perpetrator might tell a worker to buy cards online and email card numbers, personal identification numbers and security codes. Then the perpetrator quickly accesses and drains the funds.

Use of AI

Unfortunately, artificial intelligence (AI) has increased the sophistication of some BEC attacks. AI tools may allow fraudsters to effectively impersonate executives by:

Accessing their actual communications, such as emails, blog posts, letters to employees and interviews,
Analyzing their speech patterns, and
Replicating their behavior and business practices.

An employee in a BEC scam might receive AI-generated emails that imitate a CEO’s writing style and are difficult to detect as fake. Add the pressure to respond quickly and the often relatively small dollar amounts involved, and it’s easy to see why gift card scams often succeed.

Simple steps worth taking

You can fight back against even sophisticated schemes with fraud prevention training. Employees should be aware of BEC red flags, such as emails that suggest urgency, call for secrecy, request unusual payment methods, and feature altered email addresses and misspellings. Any time employees receive financial requests via email, they should be required to verify them with the sender by phone or in person. And they should know when and who to notify if they think they’ve received a fraudulent email.

Your business also should use technical tools to verify the authenticity of incoming emails. Engage an experienced security professional to assess your IT environment and recommend solutions for filtering out illegitimate emails. And keep cybersecurity software current. Installing updates as soon as they become available helps ensure your defenses include the latest tools and intelligence.

Both risks

BEC schemes exploit both technological weaknesses and human foibles. Make sure you’re addressing both risks. Contact us for help evaluating your internal controls.

Yeo & Yeo is proud to recognize 30 professionals across the firm’s companies for milestone anniversaries this year.

The longevity of our employees is a testament to the supportive and values-driven culture we strive to uphold. Our honorees exemplify what it means to build trust, navigate challenges, and serve our clients and community with care and expertise. We celebrate not only their years of service but also their contributions to the firm.

Honored for 30 years of service:

Fred Miller, Vice President, Yeo & Yeo Technology – Saginaw
Rebecca Millsap, Managing Principal, Yeo & Yeo CPAs & Advisors – Flint

Honored for 25 years of service:

Traci Cook, Medical Biller, Yeo & Yeo Medical Billing & Consulting – Saginaw

Honored for 20 years of service:

Eric Sowatsky, Principal, Yeo & Yeo CPAs & Advisors – Saginaw
Chloe Eggleston, Receptionist, Yeo & Yeo CPAs & Advisors – Saginaw
Jacob Sopczynski, Principal, Yeo & Yeo CPAs & Advisors – Flint
Gus Hendrickson, Senior Account Executive, Yeo & Yeo Technology – Saginaw
Matt Dubay, Senior Systems Engineer, Yeo & Yeo Technology – Saginaw

Honored for 15 years of service:

Dan Featherston, Senior Sales Support Specialist, Yeo & Yeo Technology – Saginaw
Michael Evrard, Principal, Yeo & Yeo CPAs & Advisors – Kalamazoo

Honored for 10 years of service:

Kelly Soper, Sales Support Specialist, Yeo & Yeo Technology – Saginaw
Megan LaPointe, Payroll Manager, Yeo & Yeo CPAs & Advisors – Saginaw
Mark Kunitzer, Systems Manager, Yeo & Yeo Technology – Saginaw
Jacob Walter, Senior Accountant, Yeo & Yeo CPAs & Advisors – Lansing

Additionally, 16 Yeo & Yeo professionals are celebrating five years with the firm. Congratulations to you all, and thank you for your contributions to Yeo & Yeo!

In April of this year, the U.S. Department of Labor (DOL) announced it was rolling out a new final rule on eligibility for overtime pay. The move prompted mixed reactions from observers, much concern among employers and, inevitably, legal challenges from its staunchest detractors.

In November, those legal challenges likely became insurmountable when a federal district court struck down the final rule. The DOL has filed an appeal but with a new presidential administration set to take the reins in January, the rule appears doomed.

Recap of the rule

Under the Fair Labor Standards Act (FLSA), many salaried employees are exempt from overtime pay. However, they’re not all exempt. To qualify as such, an employee must primarily perform certain executive, administrative or professional duties and be paid an annual salary that’s above a federally mandated threshold.

A major feature of the DOL’s final rule is that it would raise the FLSA minimum annual salary threshold in two stages:

On July 1, 2024, the threshold would (and did) increase from an annual salary of at least $35,568 to at least $43,888, and
On January 1, 2025, the threshold would increase from $43,888 to $58,656.

Note: A separate overtime exemption was to apply to some highly compensated employees. The threshold for these employees increased to $132,964 on July 1, and was scheduled to rise to $151,164 on January 1.

The final rule also stipulated that the FLSA minimum annual salary threshold would be updated every three years beginning on July 1, 2027, by applying updated wage data to the new methodology.

The court’s decision

The final rule was struck down on November 15 by the U.S. District Court for the Eastern District of Texas. In the court’s view, the DOL exceeded its authority in creating the rule because an employee’s exempt vs. nonexempt status must be based primarily on duties, not salary. The rule, according to the court, impermissibly flips that formula and makes salary the dominant factor. The agency also exceeded its authority, said the court, when it came up with the aforementioned three-year updating methodology.

The ruling was partly driven by the U.S. Supreme Court’s recent overturning of a legal doctrine known as “Chevron deference.” Under this long-standing doctrine, courts deferred to the interpretations of “permissible” federal agencies, such as the DOL, regarding the actual administration of laws. The Supreme Court’s ruling has cleared a path for courts to more readily reject agency rules, as demonstrated in this case.

Your next move

Because of the district court’s action, the FLSA minimum annual salary threshold has returned to its previous amount of at least $35,568 annually for regular salaried employees and $107,432 for highly compensated employees. This may be good news for employers that took no action to prepare for the final rule’s two-stage threshold increase. However, many organizations did take action by:

Reclassifying some employees as nonexempt,
Increasing salaries to retain exempt status, or
Reducing salaries to offset new overtime pay.

If your organization undertook such measures, you must plot your next move carefully in consultation with an attorney. You could reverse your status changes or even roll back salary increases. However, particularly in the latter case, affected employees won’t be happy. Trying to undo your actions may even prompt them to challenge — with the help of their attorneys — whether their duties warrant an exemption.

Slim to none

As mentioned, the chances of survival for the DOL’s final rule are slim at this point. What will likely occur is that, when the new presidential administration comes into power, its leadership in the DOL will withdraw the appeal currently filed. Work closely with your attorney to review and, if necessary, update your overtime policies. Contact us for help identifying and managing your employment costs.

New beneficial ownership information (BOI) reporting requirements that many small businesses were required to comply with by January 1, 2025, have been suspended nationwide under a new court ruling. However, businesses can still voluntarily submit BOI reports, according to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

How we got here

Under the Corporate Transparency Act (CTA), the BOI reporting requirements went into effect on January 1, 2024. The requirements are intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud. The CTA requires many small businesses to provide information about their “beneficial owners” (the individuals who ultimately own or control the businesses) to FinCEN. Failure to submit a BOI report by the applicable deadline may result in civil or criminal penalties or both.

Under the CTA, the exact deadline for BOI compliance depends on the entity’s date of formation. Reporting companies created or registered before January 1, 2024, have one year to comply by filing initial reports, which means their deadline would be January 1, 2025. Those created or registered on or after January 1, 2024, but before January 1, 2025, have 90 days to file their initial reports upon receipt of their creation or registration documents. Entities created or registered on or after January 1, 2025, would have 30 days upon receipt of their creation or registration documents to file initial reports.

New court ruling

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an order granting a nationwide preliminary injunction that:

Enjoins the CTA, including enforcement of the statute and regulations implementing its BOI reporting requirements, and,
Stays all deadlines to comply with the CTA’s reporting requirements.

The U.S. Department of Justice, on behalf of the Treasury Department, filed an appeal in the case on December 5, 2024.

FinCEN states on its website that it “continues to believe … that the CTA is constitutional,” but while the litigation is ongoing, it will comply with the order as long as it remains in effect.

“Therefore,” it adds, “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.”

This is the latest litigation related to the CTA. In two earlier cases, U.S. District Courts upheld the BOI reporting requirements. In another case, the CTA was ruled unconstitutional, but only the named plaintiffs and their members were allowed to ignore the BOI requirements while an appeal is pending. More than 30 million other businesses still needed to meet the January 1, 2025, deadline — until now.

The future is unclear

Be aware that the ruling is preliminary, so it could be overturned or modified by future court decisions or legislation. FinCEN stated that businesses can continue to submit BOI reports voluntarily. Contact us if you have questions about how to proceed.

Yeo & Yeo, a leading Michigan CPA and advisory firm, announces the reelection of Jamie Rivette, CPA, CGFM, and David Jewell, CPA, to Yeo & Yeo’s board of directors, effective January 1, 2025.

Jamie Rivette, CPA, CGFM, is a Principal in the Saginaw office and leads Yeo & Yeo’s Assurance Service Line. Holding the Certified Government Financial Manager credential, Jamie is recognized for her knowledge of governmental accounting, auditing, financial reporting, internal controls, and budgeting. As the Assurance Service Line leader, she oversees the quality and growth of Yeo & Yeo’s audit and assurance practice firm-wide. Jamie’s influence extends beyond the firm as she serves on the Michigan Government Finance Officers Association’s Accounting and Auditing Standards Committee and the Mentoring and Membership Committee. She is committed to the community, serving as treasurer of the Hemlock School Board of Education and as a Junior League Community Advisory Board member. Jamie has been celebrated for her leadership, receiving the Michigan Association of Certified Public Accountants’ Women to Watch Experienced Leader Award in 2019. Within Yeo & Yeo, she has been a champion of initiatives that foster growth and mentorship, including career maps and peer-to-peer mentoring.

Dave Jewell, CPA, is the Managing Principal of Yeo & Yeo’s Kalamazoo office and leader of the firm’s Tax & Consulting Service Line and Tax Advisory Group. In this role, he develops strategy and manages the growth of the firm’s tax and consulting practice, workforce, and capabilities. Dave is dedicated to making Yeo & Yeo a place where our people can find purpose, growth opportunities, and a sense of belonging and camaraderie. With more than 22 years of public accounting experience and a dedication to impactful client service, Dave’s expertise includes tax planning, business succession planning, and business consulting. He shares his knowledge through internal training and has hosted several episodes of Yeo & Yeo’s Everyday Business podcast. Beyond his professional contributions, Dave serves as Treasurer and Finance Committee Chair of the Portage Community Center, demonstrating his commitment to community involvement.

“Having both of the firm’s service line leaders on the board strengthens our collaborative approach, ensuring we can best serve and support our people and clients,” says Dave Youngstrom, President & CEO. “Jamie and Dave bring unique insights that will guide us toward continued success.”

Jamie and Dave are joined on the board by Jacob Sopczynski, CPA, Principal in Yeo & Yeo’s Flint office, and Tammy Moncrief, CPA, Principal in Yeo & Yeo’s Troy office, who will serve the second year of their two-year terms.

In one way or another, most small to midsize businesses have addressed employees using personal devices for work. In 2022, online career platform Zippia reported that 83% of companies surveyed had a bring your own device (BYOD) policy “of some kind.” That percentage has likely increased as even more businesses have recognized the inherent risks involved.

Does your company have a formal BYOD policy? If not, it probably should. And even if it does, don’t assume the current version will last forever. As technology and its usage evolve, so must your policy.

Anticipate broadly

A formal BYOD policy lays out detailed ground rules for how employees may use their personal devices for work and what role the company will have in supporting, securing and accessing those devices.

Most policies begin with a list of approved devices with acceptable security capabilities that the business can readily support. From there, be sure yours stipulates what happens to your business’s proprietary data on a device if the employee who owns it quits or is terminated. In addition, a policy should anticipate your response if a device winds up in various predicaments, such as it’s:

Lost, shared or recycled,
Synced on an employee’s personal cloud,
Used on unprotected public Wi-Fi networks, and
Hacked or otherwise attacked by a virus or malware.

Other issues to address or review include:

Payment or reimbursement. Some companies pay for a predetermined number of voice minutes and provide an unlimited data plan for employees’ phones, either directly or through reimbursements. Any charges above the stated amount of voice minutes are the employee’s responsibility.

Phone numbers. Who owns a mobile phone number is a big deal for some types of employees. Take salespeople, for example. If they leave to work for a competitor, customers may continue to call them — which could lead to lost sales for your business.

Access control. Your policy should require employees to set up their mobile devices to lock when left idle for a few minutes and require a passcode (or facial recognition) to unlock them. Where feasible, ask employees to use multifactor authentication to access certain software or data on your company’s network. This is where users’ personal devices come in handy: They can use their phones, for instance, to verify their identities along with entering a password.

Occasional security checks. Some businesses ask employees to periodically submit their personal devices to the information technology department for security checks that may involve reconfigurations or updates. Alternatively, you could ask only those who handle highly sensitive data to do so.

Address privacy thoroughly

Many employees worry that using personal devices for work gives their employers access to sensitive personal data. Your BYOD policy should state that the company will never view protected information such as:

Privileged communications with attorneys,
Protected health information, or
Complaints against the business that are permitted under the National Labor Relations Act.

Your policy needs to also clarify how data stored on employees’ devices may be gathered if your company becomes involved in a lawsuit. Keep in mind that federal rules governing the production of documents during litigation, including electronically stored information, cover all devices — including personal devices that access a company’s network.

Remain vigilant

The negative financial impact of an outdated, incomplete or nonexistent BYOD policy can be severe. After all, the personal devices of your staff members represent multiple avenues through which hackers, employees or other bad actors could compromise your business’s data or network. Work with your attorney to review your current policy or create one if you haven’t already. Our firm can help you identify and analyze all your technology costs.

Understanding how to deduct transportation costs could significantly reduce the tax burden on your small business. You and your employees likely incur various local transportation expenses each year, and they have tax implications.

Let’s start by defining “local transportation.” It refers to travel when you aren’t away from your tax home long enough to require sleep or rest. Your tax home is the city or general area in which your main place of business is located. Different rules apply if you’re away from your tax home for significantly more than an ordinary workday and you need sleep or rest to do your work.

Your work location

The most important feature of the local transportation rules is that your commuting costs aren’t deductible. In other words, the fare you pay or the miles you drive to get to work and home again are personal and not for business purposes. Therefore, no deduction is available. This is the case even if you work during the commute (for example, via a cell phone or laptop, performing business-related tasks on the subway).

An exception applies for commuting to a temporary work location outside of the metropolitan area where you live and normally work. “Temporary,” for this purpose, means a location where your work is realistically expected to last (and does, in fact, last) for no more than a year.

Work location to other sites

On the other hand, once you get to your work location, the cost of any local trips you take for business purposes is a deductible business expense. So, for example, the cost of travel from your office to visit a customer or pick up supplies is deductible. Similarly, if you have two business locations, the cost of traveling between them is deductible.

Recordkeeping

If your deductible trip is by taxi or public transportation, save a receipt or note the expense in a logbook. Record the date, amount spent, destination and business purpose. If you use your own car, note the miles driven instead of the amount spent. Also, note any tolls paid or parking fees, and keep receipts.

You must allocate your automobile expenses between business and personal use based on miles driven during the year. Proper recordkeeping is crucial in the event the IRS challenges you.

Your deduction can be computed using:

The standard mileage rate (for 2024, 67 cents per business mile) plus tolls and parking, or
Actual expenses (including depreciation, subject to limitations) for the portion of car use allocable to the business. For this method, you’ll need to keep track of all costs for gas, repairs and maintenance, insurance, interest on a car loan, and any other car-related costs.

Employees vs. self-employed

From 2018–2025, under the Tax Cuts and Jobs Act, employees can’t deduct unreimbursed local transportation costs. That’s because “miscellaneous itemized deductions” — including employee business expenses — are suspended (not allowed) for these years. (Self-employed taxpayers can deduct the expenses discussed in this article.) But beginning in 2026, business expenses (including unreimbursed employee auto expenses) of employees are scheduled to be deductible again, as long as the employee’s total miscellaneous itemized deductions exceed 2% of adjusted gross income. However, with Republican control in Washington, this unfavorable provision may be extended by Congress, and miscellaneous itemized deductions won’t be allowed.

Goodwill impairment is often a negative indicator. It potentially signals that a business combination failed to meet management’s expectations due to internal or external factors. In recent years, uncertain markets, lingering inflation and high interest rates have caused goodwill impairments to spike.

Evaluating impairment trends

In 2022, 400 U.S. public companies reported $136.2 billion of pretax goodwill impairments. In 2023, 353 U.S. public companies reported an estimated $82.9 billion of pretax goodwill impairments. While the estimated impairment losses fell by 39% from 2022 to 2023, the total is well above the historical average dating back to 2006.

The trend appears to be ongoing. In the first quarter of 2024, Walgreens reported a $12.4 billion pretax impairment loss related in part to its acquisition of VillageMD, a health care company. As market volatility continues, other companies may follow suit in fiscal year 2024.

This historical data excludes write-downs reported by private companies whose results aren’t publicly available. Plus, there’s often a lag in the effects of financial reporting on private businesses compared to their public counterparts.

Accounting for goodwill

Goodwill is reported on a company’s financial statements if it’s acquired through a merger or acquisition. The purchase price of a business is first allocated to the following items based on their fair values:

Tangible assets,
Identifiable intangible assets, and
Liabilities obtained in the purchase.

What’s left over is reported as acquired goodwill (an indefinite-lived intangible asset). Goodwill must be monitored for impairment in accounting periods after the acquisition date. That happens when the fair value of goodwill falls below its cost. Impairment losses reduce the carrying value of goodwill on the balance sheet. They also lower profits reported on the income statement. Tracking the value of goodwill helps management and external stakeholders evaluate a business combination over the long run.

Estimating impairment losses

Under U.S. Generally Accepted Accounting Principles (GAAP), public companies that report goodwill on their balance sheets can’t amortize it. Instead, they must test goodwill at least annually for impairment. When impairment occurs, the company must write down the reported value of goodwill. Testing should also happen for all entities whenever a “triggering event” occurs that could lower the value of goodwill.

Private companies can elect certain practical expedients to simplify the subsequent accounting of goodwill and other intangibles. Specifically, Accounting Standards Update No. 2014-02, Intangibles — Goodwill and Other (Topic 350): Accounting for Goodwill, allows private companies that follow GAAP the option to amortize acquired goodwill over a useful life of up to 10 years. The test that private businesses must perform to determine goodwill impairment was also simplified in 2014. Instead of automatically testing every year, private companies must test for impairment only when there’s a triggering event.

However, not all private companies choose to adopt these expedients. For instance, large private companies that are considering a public offering may follow the rules for public companies. The decision depends on specific business circumstances.

Close-up on triggering events

All companies — whether publicly traded or closely held — must evaluate impairment when a triggering event happens. The source of these events may be internal or external. Examples include:

An economic downturn,
Unanticipated competition,
A major cyberattack or lawsuit,
Disruptive industry regulations,
The loss of a key customer,
Leadership changes, and
Negative operating cash flows.

Goodwill impairment may also occur if, after an acquisition, an economic downturn causes the parent company to lose value.

Goodwill gone bad

Public companies must report financial results quarterly, so they’re continually monitoring for impairment. However, private businesses often postpone evaluating the effects of triggering events until the end of the accounting period. If your company reports goodwill on its balance sheet, contact us to evaluate your company’s current situation and ensure transparent reporting.

Additionally, if you’re contemplating a merger or acquisition, it’s important to determine whether the price is fair based on the target’s financial health, market position and potential for future growth. We can help you conduct comprehensive due diligence to reduce the risk of overpaying.

Annually, the IRS makes inflation-based cost-of-living adjustments (COLAs) to dollar limits applicable to many employer-sponsored fringe benefits for the upcoming year. Sure enough, in November, the tax agency published its COLAs in IRS Notice 2024-80. Here are some key figures to be aware of heading into 2025:

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). The maximum payments and reimbursements under a QSEHRA will be $6,350 for self-only coverage and $12,800 for family coverage (up from $6,150 and $12,450, respectively, in 2024).

Health Flexible Spending Accounts (FSAs). For 2025, the dollar limit on employee salary reduction contributions to health FSAs will be $3,300 (up from $3,200 in 2024). In cases where a cafeteria plan allows carryovers of health FSA balances, the maximum amount from 2025 that can be carried over to the 2026 plan year will be $660 (up from the $640 that can be carried over to the 2025 plan year).

Pension-Linked Emergency Savings Accounts (PLESAs). The Secure 2.0 Act of 2022 authorized the addition of PLESAs to eligible employer-sponsored defined contribution plans, such as 401(k)s. These accounts allow participants to save for financial emergencies, so they don’t have to draw from their retirement plans following a crisis. For 2025, the contribution limit to PLESAs will remain unchanged at $2,500.

Benefits under a dependent care assistance program (DCAP). The DCAP limit isn’t adjusted for inflation so, for 2025, it will remain at $5,000 for single taxpayers and married couples filing jointly, or $2,500 for married people filing separately. These dollar amounts will apply in future years, too, unless they’re changed by Congress.

That said, some adjustments to certain general tax limits are relevant to calculating one’s federal income tax savings under a DCAP. These include the 2025 tax rate tables, earned income credit amounts and the standard deduction.

Adoption assistance exclusion and adoption credit. Under an employer-provided adoption assistance program, the maximum amount that may be excluded from a participant’s gross income for adopting a child will be $17,280 (up from $16,810 in 2024). The maximum adoption credit a participant may claim will also be $17,280.

The adoption exclusion and credit are subject to an income-based phaseout. The phaseout begins to kick in when a participant’s modified adjusted gross income exceeds $259,190 (up from $252,150 in 2024). The exclusion and credit are entirely phased out for individuals with modified adjusted gross incomes of $299,190 or more (up from $292,150 in 2024).

Qualified transportation fringe benefits. The monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits will be $325 (up from $315 in 2024). The combined monthly limit for transit passes and vanpooling expenses will also be $325.

Employers have two primary jobs related to these and other COLAs: 1) Be aware of how they’ll impact your fringe benefits, and 2) Communicate the changes to your employees. The latter point is particularly important if you’re revising whether and how you’ll offer certain fringe benefits in 2025. We can help you identify and evaluate all the COLAs affecting your organization’s benefits menu.

When a person considers an “estate plan,” he or she typically thinks of a will. And there’s a good reason: A well-crafted, up-to-date will is the cornerstone of an estate plan. Importantly, a will can help ease the burdens on your family during a difficult time. Let’s take a closer look at what to include in a will.

Start with the basics

Typically, a will begins with an introductory clause identifying yourself and where you reside (city, state, county, etc.). It should also state that this is your official will and replaces any previous wills.

After the introductory clause, a will generally explains how your debts are to be paid. The provisions for repaying debt typically reflect applicable state laws.

You may also use a will to name a guardian for minor children. To be on the safe side, name a backup in case your initial choice is unable or unwilling to serve as guardian or predeceases you.

Make bequests

One of the major sections of your will — and the one that usually requires the most introspection — divides up your remaining assets. Outside your residuary estate, you’ll likely want to make specific bequests of tangible personal property to designated beneficiaries. For example, you might leave a family heirloom to a favorite niece or nephew.

When making bequests, be as specific as possible. Don’t simply refer to jewelry or other items without describing them in detail. This can avoid potential conflicts after your death.

If you’re using a trust to transfer property, identify the property that remains outside the trust, such as furniture and electronic devices. Typically, these items won’t be suitable for inclusion in a trust.

Appoint an executor

Name your executor — usually a relative or professional — who’s responsible for administering your will. Of course, this should be a reputable person whom you trust.

Also, include a successor executor if the first choice can’t perform these duties. If you’re inclined, you may use a professional as the primary executor or as a backup.

Follow federal and state laws

Be sure to meet all the legal obligations for a valid will in the applicable state and keep it current. Sign the will, putting your initials on each page, with your signature attested to by witnesses. Include the addresses of the witnesses in case they ever need to be located. Don’t use beneficiaries as witnesses. This could lead to potential conflicts of interest.

Keep in mind that a valid will in one state is valid in others. So if you move, you won’t necessarily need a new will. However, there may be other reasons to update it at that time. Contact us with any questions regarding your will.