The Source Episode 2

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Episode Description: On the surface “constructive receipt” sounds like an “inside baseball” term for accountants. But it’s not. Once a payroll payment is received by an employee, businesses become liable for taxes on that income, which can be a problem.

About Our Speakers


Stephanie Salavejus, CPP

Stephanie is the Vice President and COO of PenSoft, a payroll software provider, is a Vice President with the American Payroll Association, was APA’s Payroll Woman of the Year for 2017, and is a former member of the IRS Commissioner’s Advisory Group. She has over 33 years’ experience in payroll and accounting, of which over 26 years have been with PenSoft. Stephanie graduated from Christopher Newport University in Newport News, Virginia, with a Bachelor of Science degree in Accounting

Jason Lee

Jason Lee is CEO and co-founder of DailyPay, a venture backed financial technology company that enables employees to access their wages before payday. DailyPay partners with large enterprises to offer its technology solution to their workforces, which results in a meaningful reduction in turnover and related cost savings. Every Saturday morning, Jason enjoys spending his time at the Father’s Soup Kitchen, helping serve hot breakfast to New York’s homeless population.

Michael Baer, Host

Michael was formerly the managing editor overseeing domestic and international payroll information with Bloomberg Tax, previously BNA. He has spent the better part of three decades covering payroll and HR issues. Michael initially gained his experience in payroll and human resources with Marriott, and later was the personnel manager for the Shanghai Hilton. He lives with his wife and children in Alexandria, Virginia.

In this podcast you will learn about…

  • Find out why payroll professionals concerned that some on-demand pay providers may be exposing their employers to additional liability
  • Learn about the different types of on-demand pay providers, and how could they trigger additional payroll compliance burden
  • Hear how an on-demand pay vendor can provide its services without the employer having to deal with constructive receipt or payment
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Thanks for tuning in!

Podcast Transcript:

Speaker 1:

Welcome to The Source, the definitive destination for timely and informative regulatory updates and issues in the on-demand pay industry. The Source is brought to you by DailyPay, the industry leading provider of the daily pay benefit and pay experience. This material is for general information only. And the views expressed here-in reflect only the views of the participants. This program should be considered marketing material and should not be relied on as legal, tax, accounting or regulatory advice. And now let’s welcome our host Michael Baer.

Michael Baer:

Hello everyone. And welcome to The Source. The Source is sponsored by DailyPay, and it is your look into active and upcoming legislation, industry insights and news. It’s also a chance to understand the questions surrounding the on-demand pay industry. Today, we will be discussing a key employer issue for providing employees access to their pay winner. It’s called constructive receipt. So constructive receipt, what is it? And how does it impact the on-demand pay space?

Michael Baer:

With us today, calling in is Stephanie Salavejus. She’s the Vice President and Chief Operating Officer at PenSoft, a payroll service provider. And not only that, she is a Vice President with the American Payroll Association and the APAs 2017 Payroll Woman of the Year. And recently Stephanie lately also is a former member of the IRS Commissioner’s Advisory Group.

Michael Baer:

Also with us today, I welcome Jason Lee, the CEO of the fastest growing on-demand wage access platform, DailyPay. He knows a little bit about constructive receipt. So Stephanie welcome.

Stephanie Salavejus:

Thank you Mike. I’m happy to be here.

Michael Baer:

And Jason, welcome.

Jason Lee:

Michael, it’s a pleasure and an honor to be here with you.

Michael Baer:

Okay. First as it becoming a tradition here at The Source, it’s, This Day in Legal History, it’s a legal fact. And on this day on November 13th, 1956, the Supreme Court refused to consider an appeal to overturn a ruling banning segregation laws on public buses in Alabama, and this effectively ended such practices nationwide, and it follows that Montgomery bus boycott that we all learned about in school. Also a second piece, a second thing that happened on November 13 is President Roosevelt in 1942 lowered the draft age for military to 18 from 21.

Jason Lee:

Mike, it’s funny, you bring up President Roosevelt. It reminds me of, one of probably the greatest things that FDR did as part of The New Deal was introduced the concept of employer-sponsored healthcare. And up until that time folks sort of had to self-fund going to the doctor. And as part of America’s New Deal, FDR introduced this concept. And if you actually look historically at what happened and believe it or not, this has to do with our topic today. If you look at actually what happened in terms of who were the first employers to actually adopt employer-sponsored healthcare, not surprisingly, it was those companies for whom it made the most sense. It was those companies who would actually suffer in their business if someone was sick and wouldn’t go to the doctor.

Jason Lee:

So the classic example of that, were the auto-manufacturers. Mike, think about this, here I am, I’m a assembly line worker, I get the flu, but I don’t have enough money to go to the doctor. Well, what happens? Here I am kind of sneezing and coughing. I’m touching the parts. Then it goes down to the next guy.

Michael Baer:

Then the work’s sick.

Jason Lee:

Exactly. The whole assembly line is now out of work, home, sick with the flu. And meanwhile, GM and Ford can’t make their production deadlines. And so quite simply there are employer benefits, which actually make really good business sense. And that’s a lot of what we’re seeing here today in the, on-demand pay industry. The very early adopters are those companies where it just makes good business sense. This is a benefit which reduces turnover and not surprisingly the industries that are sort of gravitating towards this in the early days are those who are really suffering and looking for solutions for turnover. So I didn’t realize you were going to bring up a Roosevelt factor and I love it. I’m a huge American history buff. And so believe it or not, there is some connection here to the topic today.

Michael Baer:

Well, I like how you pulled it in and that’s great. I would like to now, let’s turn it over to Stephanie here. I wanted to discuss this constructive receipt issue now, but before we do that, we’ve had the deal with these issues prior to the advent of the earned wage access apps. And as a payroll professional and someone who has advised IRS on electronic payroll applications, what are your thoughts on this movement? This groundswell, to change the timing of pay for employees?

Stephanie Salavejus:

Well, Mike, as an employer, the platform provides opportunity for us to be competitive in hiring in addition to retaining employees, but it also provides workers with receipt of their money almost immediately in contrast to traditional pay cycles. With that said the one thing is employers need to be very careful in choosing their platform to make sure that they do their due diligence. You don’t want to get involved in something that can be detrimental for the employee or the employer. So it’s extremely important to do your homework.

Michael Baer:

Well, that’s right. I think absolutely got to agree with you on that one, Stephanie. So let’s move on to the topic of the day, defining constructive receipt for payroll and employers and why for some providers in the earned wage access arena, this could be a compliance issue. So tell us a little bit about constructive receipt as we have learned it as payroll professionals, Stephanie.

Stephanie Salavejus:

Well, Mike, under the principle of constructive payment, an employee is considered to have been paid when the wages are made available to the employee without substantial limitation or restriction. And what this basically means is, the wages can be drawn on or controlled by the employee. And this is very important in the payroll industry. A good example is year-end wages that were worked in 2019, but actually paid in 2020 would be reported on the employee’s 2020 Form W-2.

Michael Baer:

Well, and if I may say, in the traditional way, when we used to issue paychecks and there are still paychecks being issued and there was a whole stack of paychecks for that pay cycle, what we would do. And in many cases, some employers say, as your example is coming to, at the end of the year, employers sometimes would issue say, a December 30th payroll, but it’s dated January 2nd. And what does that mean in terms of the employer liability at that point, Stephanie?

Stephanie Salavejus:

Well, at that point, the employee has constructive receipt. So that would have implications on when the wages were reported in the taxable year. But also there’s implications related to quarterly reporting and depositing requirements for those employers. So that’s something that they have to be very cognitive of.

Michael Baer:

So am I right to say, if somebody jumps the gun on a payroll and issues of paycheck say, before the pay day, that triggers a whole bunch of requirements for the employer for that day, they actually gave that pay out, even though it’s dated at a later date. Is that fair to say?

Stephanie Salavejus:

That is fair to say, you’re absolutely correct there, Mike.

Michael Baer:

So on the employer side at year end, if someone gave a payout on December 30th, but the check was dated January 2nd and say it’s 2019 to 2020, then that payroll effectively is now in 2019 and all the liabilities in 2019. And that changes a whole bunch of stuff for payroll.

Stephanie Salavejus:

Oh, absolutely. It has major implications in the reporting as well as the release of revenue to pay the tax liabilities.

Michael Baer:

Right. And then we’re triggering as well on the quarter… This can happen on a quarterly basis as well. So say, somebody gets a paycheck on March 30th, but it’s dated April 2nd. It’s the same kind of thing, you have these quarterly reporting obligations that employers have to… The liability, all of a sudden is in the previous quarter. And if they mess up on that, there can be penalties.

Stephanie Salavejus:

Oh yes. And those penalties and the interest are very stiff if you do not properly process your tax liabilities. So again, it’s something employers pay very close attention to.

Michael Baer:

Right. And it’s an extremely important concept to understand. And I think we’ve kind of elaborated on that enough, but let’s talk about how some of these on-demand pay solutions are often billed as solutions that enable employers, the ability to offer this pay to employees without actually having to deal with the hassle that comes with it on both sides. But how do employers avoid constructive receipt issues if employers are paying employees only on demand, does that mean that constructive receipt has to be calculated each time?

Stephanie Salavejus:

Well, one of the important aspects when looking at the platforms is making sure that because of the diversity and the platforms being managed differently by the various vendors, it does create challenges for employers. But employers should pay close attention to the federal regulations as to the wages are subject to payroll tax withholding. They could be subject to depositing rules and reporting requirements when the employee is actually or constructively paid. Ensuring employees are meeting their financial obligation is always extremely important to employers, but also important is the employer’s ability to remain compliant in the collection of say, child support and garnishments. And ultimately it is the employer’s responsibility ensure they are in compliance with all federal State, local minimum wage, overtime and any payday requirements.

Michael Baer:

Yeah. So in essence, it’s possible that some of these vendors could be triggering these requirements at the time that an advance or an on-demand payment is made. So let me just mention this now, numerous groups, including the American Payroll Association have reached out to the IRS asking that they provide guidance on constructive receipt, but the IRS so far, we have not heard anything as to the employer’s responsibility for withholding, depositing or reporting requirements related to same-day platforms. Am I right Stephanie?

Stephanie Salavejus:

Mike, you are right. The American Payroll Associations, government relations division has been actively following same-day pay platforms in the interest of their members. And for that, we are extremely grateful because we need the assistance and the guidance to make sure we’re in compliance. But in addition to that, several of the government relations task force have participated in discussions with same-day plan providers. And we’ve provided comments as well as outlining our employer’s concerns as it relates to this service. The open dialogue has been extremely beneficial to both sides and numerous groups have reached out to the Internal Revenue Service asking that they do provide guidance, but so far the IRS has remained silent as to the employer’s responsibility to withholding, depositing or even reporting requirements related to the same-day pay platforms.

Michael Baer:

That’s right. And just to kind of provide a regulatory update on that. So in June, the American Payroll Association included in their comments to IRS priority guidance plan, a suggestion that IRS consider elaborating a little more on the constructive receipt issue, if they could include it in their guidance plan and subsequent issues. But the IRS in October issued their update to their priority guidance plan. And that constructive receipt issue was not a priority obviously for the IRS. So let’s turn to Jason Lee here, as CEO of DailyPay Jason, I understand that this is a compliance issue for some so-called early wage access providers. Am I right?

Jason Lee:

Well, Mike, again, it’s great being here and Stephanie, all that was spectacular and obviously I’m thrilled to be sitting here with you given your background and your level of expertise in all things payroll. So thanks for that. So look, we can certainly speak from our perspective, not really giving too much commentary about kind of other models that are out there, but you had raised earlier, Mike, the concept that, “Hey, APA and we at DailyPay were certainly also a part of this submitting, a request to the IRS for some rule clarification, it not making the priority plan.”

Jason Lee:

Now, they haven’t told me this personally, a part of me thinks that it’s not a priority because the rules are already defined. I think I’ve shared this on this podcast before, but I live in New York and in New York when you drive a car and when you look for parking, the signs actually only tell you when you can’t park, there are no signs that tell you where you can park. In other words, the assumption is if the sign says “You can’t park here.” Well, you shouldn’t park there, but everywhere else, the assumption is you can park there.

Jason Lee:

I kind of think a lot about that, when I think about folks like the IRS and other governing bodies. In general, they kind of say, “Look, the rule set’s kind of out there already, and you need to interpret the guidance as it exists. And we’re never going to tell you whether or not something is permissible.” Rather, they’ll only tell you when something is not permissible. And so that’s really kind of how we think about this issue of constructive receipt. There’s a fair amount of literature out there that talks a lot about what does constitute and what does characterize a wage payment.

Jason Lee:

And thankfully, a lot of this guidance is actually very simple, is it from the company? Is the company funding the wage payment? Is it permanent? Is it based on the hours that you worked? Is the company or the employer involved in making that decision? And so there are some very basic kind of rules out there that determine whether or not something’s actually a wage payment. One of the principles Mike, that we look a lot at and I hope I’m allowed to say this on this podcast.

Michael Baer:

Go right ahead.

Jason Lee:

Okay. Well, I think those who are more shy should close their ears, but we call this the crap principle. And what crap stands for is it’s Constructive Receipt As you Pay. Meaning, from an employer standpoint, as the employer is funding these payments. And as you’re out there making these payments to employees, candidly, there’s probably some risk there that that’s constructive receipt. If on the other hand, and this is why for example, our model is set up this way. If it’s a third party, that’s actually funding all the payments that has no involvement with the actual employer. That’s probably a little bit safer and a little bit less controversial from the standpoint of, “Hey, that’s not the company at all. It’s actually a third party that’s making these payments, that really has nothing to do with the employer making payments.” And so consequently, that tends to be interpreted as not constructive receipt.

Michael Baer:

So we’re seeing kind of two different models out there, that you’re describing to me. So like a company funded kind of model that’s the employer funding that, and then there’s another model out there that doesn’t involve the company having to fund these are earned wage access.

Jason Lee:

Yeah. So look, and I should probably start by saying constructive receipt is not illegal. There’s nothing ethically or existentially wrong about it being treated as a constructive receipt of wages. It’s just that now the company has some obligations that they must fulfill if it is in fact constructive receipt. But certainly Mike, I can take this to an extreme, I mean some companies pay weekly, they probably look very jealously at companies who pay biweekly or who pay monthly, meaning there’s nothing inherently wrong about something being a constructive receipt of wages. I think as Stephanie had alluded to earlier, you just have to know what the implications of that are going into something.

Jason Lee:

So with that as backdrop. We do tend to look at this really on a spectrum. And that spectrum on one side it’s, Hey gosh, the employer is funding these payments, the pay on payday is being netted out against that amount. Gosh, it is kind of hard to not interpret that as a constructive receipt of wages. You paid out a part of the money during the week and then you paid the rest on the payday. When you add up those two numbers that equals the full amount of the net pay. And so sensibly, and we don’t work at the IRS, but I guess sensibly one would look at that and say, “Okay, that’s pretty straightforward. You split the wage payment between a Tuesday and a Friday and-

Michael Baer:

You basically paid twice.

Jason Lee:

Yeah. And I think that’s probably the sensible interpretation of that.

Michael Baer:

Right. So that first pay is actually a constructive receipt pay. And then all those issues that employers have to deal with that Stephanie and I discussed have to be considered.

Jason Lee:

Yeah. And look, as I said, there’s nothing ethically or inherently wrong with that. It’s just that, that first payment now has some consequences. And various employers based on their level of staffing, within the payroll department in their ability to do these things, they may decide, “Hey, that’s fine with us. We’ll deal with the consequences and the implications of having a constructive receipt on a Tuesday, as opposed to only on the Friday payday, so to speak.” So I think that’s on one end of the spectrum.

Jason Lee:

On the far end of the other side of the spectrum is where it’s really the model that we have, which is, Hey, the employer literally is running payroll as they normally do every single payday, they do not change the amounts. They literally just run the payroll. I run it and the full net pay is remitted and nothing changes, literally nothing changes. They just run the full amount of the payroll on Friday or whatever the payday is. And the employee receives 100% of the net pay into her direct deposit account of record. And the employer does nothing differently. I think it would also be sensible to conclude that that is probably on the other end of the spectrum in terms of the constructive receipt analysis. And we of course take the position that, of course, any payments made ahead of time are not constructive receipt of wages because the employee is still receiving 100% of the wages on the payday.

Michael Baer:

And then the employer generally doesn’t even know that the employee has actually accessed any pay.

Jason Lee:

Right. And so the employer is, it’s sort of behind the veil, so to speak, and does not even know what’s happened in the interim due to the technology that’s been set up. I think the sort of level 201 issue Mike, which is kind of getting to the next level. So on the spectrum, those are fairly obvious. I think the level two analysis, which gets a little bit trickier is, what happens if you’re in between? In other words, there’s sort of a hybrid model out there, which is, “Hey, the vendor has made the payment, but on payday, there’s a payroll deduction.” And the employer pays out the net amount to the employee directly, but the amount of the advance is being sent back to the vendor.

Jason Lee:

And I think that’s a bit of a hybrid model. And I think there, the analysis does get a little bit more tricky and look, our view is we’re not that clever here. We sort of look at this as, “Mmh, okay. Employee was going to get $500 on payday. Well, she got $100 from the vendor, $400 from the company. Gosh, that like 500 was split across two payments.” Well, that feels like that should be a constructive receipt also. Even though it’s not the company’s money, let’s say it’s the vendor financing that $100 payment, but it doesn’t really matter because now that pay has been split across two parties, because by definition on payday, the employer has netted out that amount.

Michael Baer:

And it sounds like that the employer’s payroll systems are involved in that whole process too.

Jason Lee:

Correct. So the deduction has to get processed. If you really want to get hyper-technical, and again, I’m probably the wrong guy to address. You probably need a different guest on this podcast, but there is a concept that was propounded about 12 years ago called statutory employment risk. And in the statutory employment tax consequence, the issue is, has the actual vendor been designated as an agent of the actual employer itself? And in that case, that was litigated, what the case law said is actually, “Yes, if the pay is being split across two parties, then in fact that first payment was attributable to the employer. And so consequently, it should have been a constructive receipt.”

Michael Baer:

That the agency was acting on behalf of the employer.

Jason Lee:

Exactly. So I think that it’s sort of that middle model. It has some diligence. And I think all of these things, of course, as Stephanie said, require the employer to do a little bit of digging here. But again, I think we kind of keep it simple, which is, don’t touch the employer’s payroll system, let the employer just run it as they always have. And the pay stub, the amount that gets sent, the records, it all just reflects the net pay on the given day.

Michael Baer:

Okay. That’s great. So what about the implications this might have on employers processing garnishment and arrears?

Jason Lee:

Yeah. Look, Stephanie raised it, it’s tricky. When you look at anything that requires the employer being involved, of course, garnishments become a question. We were just speaking at the Office of Child Support symposium. They do a national symposium, they do in beautiful place out in the Midwest. And so our Head of Product Marketing was out there, was invited to be out there speaking, alongside the Commissioners of the Office of Child Support, really sort of walking through how the various models work for garnishments. And again, I think here, we kind of keep it simple, which is boy, garnishments are due, this is the responsibility frankly, of the employer.

Jason Lee:

And if I could just not make this so technical Mike, candidly, there are single parents out there who rely on these payments. And so before I talk any of this, we got to get this right. And that was really the message that I shared with at the symposium, which is we got to get this right. The consequences of not getting this right. It’s not about compliance. It’s about single parents not getting their checks. And so one of the things that we are very focused on along with the Office of Child Support and the commissioners there is really around how do you preserve and make sure that anyone who gets an advanced payment is not in some way consciously or subconsciously kind of getting around the garnishment obligation. Meaning, gosh, what if they get half their money on a Tuesday, God forbid they quit. And now that person’s received those funds, but they never actually paid the garnishment that they owed to whoever the recipient of those funds were.

Jason Lee:

And so that’s a lot why when we partner with the Office of Child Support, one of the things that they have found so attractive about the concept of employers do nothing differently on payday is that in 100% of the cases that garnishment’s preserved. Meaning, the garnishment is processed by the employer, as it always has been on the actual payday and all of the advanced payments, none of that impacts the employer’s ability to do that. And that’s super important to be able to preserve that ability. It’s important for the employer to remain in compliance of course, of the garnishment requirement, but candidly, it’s important for the recipients. And honestly from my own perspective, we just can’t let someone’s ability to receive on-demand pay, impact in any way, the ability for them to owe their garnishment to the recipient.

Michael Baer:

Okay. And then there was also those, some of the on-demand pay providers just do kind of like a flat 50%. We’re going to get a measure of what this employee is earned so far and then just do a flat 50% and that can get them in trouble too. I understand.

Jason Lee:

Yeah. And look, what I would say is every employer and kind of needs to do their work on this to really understand it. Mike, maybe I can start by saying there is a little bit of an overlap here, meaning for what it’s worth, those folks who have high garnishments candidly tend to be the ones who need a product like this. And so we are talking about a real user base with a real pro… There’s a real issue here. And so what I’ve seen in the market is a couple of different ways to approach this. The first is a blunt kind of… Well, actually, let me start with the very first, which is there are providers or models would say, “Look, if you have garnishments, you just can’t use the product.” And so from that standpoint, the garnishment is absolutely preserved, but then frankly, the benefit-

Michael Baer:

But there’s a need in the market not being met.

Jason Lee:

Exactly. The employer is not getting the benefit of the employees using the benefit. It’s like saying, “Hey, you can go to the doctor if you have a sniffle, but if you have the flu, sorry, you can’t go. We’re not going to pay for that insurance.” Honestly, those who really need this product are probably those who have high levels of garnishments. So table stakes is you have to offer it to people who have garnishments, because that probably is the population of folks who actually need the product and where the employer will receive the benefit.

Jason Lee:

Incidentally, in my experience, we have found that employers also, don’t like to discriminate against those who have garnishments. It’s kind of a, “Look, we got to make sure that whatever we’re doing here is available for all employees just given the social and HR issues associated with discriminating against those who have high levels of garnishments.” So step one, let’s make sure the product offers it. In general, there are kind of two ways to deal with garnishments. The first is you say, “Look, we’re just going to do a flat rate.” So as an example, I think-

Michael Baer:

Like I was saying, 50%-

Jason Lee:

Yeah. As you referenced, “Hey, only 50% of the net or gross income is available.” And that’s helpful, but in this day and age, I don’t know, it’s very crude. It seems like a very, for lack of better words, unsophisticated, untailored…

Michael Baer:

Well, if you can do better, you probably should do better.

Jason Lee:

Yeah. And really, as HR folks and payroll folks know, today it’s all about employee engagement and customized experiences and payroll integrity. And how do you create more of a customized experience for the end employee? And so we find that a way to do it, but really where we have tried to go on this is to use, it’s a fancy term, but we use an element of machine learning, which is really just a complicated way of saying, “We basically figure out, well, what is the adjusted amount? What is the net amount, including a very unique garnishment.” So we back all that out and we create an individualized profile for each person. So Mike, you may be someone who does not have a garnishment. And so you’re just getting up to 100% of your net wages. Maybe your neighbor, Sally, maybe she has a child support garnishment. And so we back that out and we customize a profile using some machine learning so that she can still get 100% of her income post that garnishment amount. So she’s never going to be in risk of not filing or paying that garnishment, but she’s not being unfairly discriminated against or penalized for having one.

Michael Baer:

Okay. Well, that’s fantastic. So the bottom line, employers using DailyPay do not have a concern about constructive receipt. Am I right there, Jason?

Jason Lee:

Well, look, I think every employer needs to kind of look at this issue, but I would certainly say on the spectrum, we certainly have a view that because the employer is doing nothing differently on the actual payday, you can park here, Mike.

Michael Baer:

Okay, fantastic. It’s wide open the space. So what I want to do is thank our guests, Jason, thank you very much. Stephanie, thank you so much for joining us to explain the constructive receipt concerns. And thanks for clarifying that there are legitimate providers out there that can deliver earned pay amounts before payday, without exposing employers to constructive receipt. So we have a couple of-

Stephanie Salavejus:

Thank you Mike.

Michael Baer:

Oh, you’re very welcome. And thank you so much. So we have a few questions and it looks like they might be directed to Jason here. So let’s ask them here. First one is, if you were to say one thing that helps to avoid constructive receipt issues and on-demand pay, what would it be?

Jason Lee:

Sure. So thanks to whomever logged that question in. Gosh, I think probably if I were truly to answer that question in the way that it was phrased, like one thing, funding. Again, I think a lot of this is, you kind of use the common sense principle, which is, “Hey, does it look like pay or not?” And what looks like pay is when the company is funding it. And I just don’t know how to cut around that, when it’s the employer’s own money, when it’s going to the employees, you can’t get it back, honestly, that’s pay.

Michael Baer:

Can’t really get around that issue. You’re obligated in.

Jason Lee:

Yeah. And like, slap your forehead, “Oh crap.” Yes. Constructive Receipt As you Pay.

Michael Baer:

Okay. And then a second question here, I’ve heard the only way to avoid this constructive receipt is through a pay card model. Is that true? And why or why not?

Jason Lee:

Yeah. I’m actually not sure what the background or context of that question is. This really has very little to do with the delivery mechanism. It has more to do with, is the company funding it, have you split the paycheck?

Michael Baer:

And the timing of [crosstalk 00:35:39].

Jason Lee:

And the timing. And the IRS really doesn’t take a view on the actual delivery mechanism. The only way to avoid this as if you bank at Chase, sponsored by Chase. I don’t actually think there’s any real magic to the delivery mechanism or where the employee is banking. This really more has to do with an employer’s characteristics, is the employer funding it? Has the employer essentially split the paycheck into two periods of time, as you said? What’s the employer doing on payday? If there’s one thing I’ve learned over my years, keep it simple. Just look at very simple, simple assessments and applications. And you can probably figure out the answer by asking some very simple questions.

Michael Baer:

Okay, fantastic. And we got one last question here. When do you think any regulatory activity surrounding constructive receipt will be handed down? And I think we already saw that it’s not on the priority guidance list for IRS. Stephanie, do you have any clue your insight with the IRS maybe?

Stephanie Salavejus:

No, I don’t. They’ve remained silent on that.

Michael Baer:

Yeah.

Jason Lee:

Yeah. And look, we sort of think about this a little bit differently, they already have spoken. One of the really important things when you do new stuff is you have to be compliant with the existing regulation. It does nobody any good to say, “Well, we’re doing this thing, but no one’s really slapped our wrist yet.” That’s not that doesn’t really help anyone. And frankly, for employers and we don’t want to put folks in that risk. And so I think the better way to think about that question to whomever it is that asked is, well, is the program compliant today? Does it actually work today as opposed to, does it require a clarification tomorrow? And that as I said, I had to keep these things very simple. That’s sort of why we’ve designed our approach really to be compliant today, Michael.

Michael Baer:

So if there are questions about that, then that’s the issue. Okay. Well, Jason Lee, Stephanie Salavejus, again, thank you very much. This concludes this month’s edition of The Source and we’ll be back next month with another exciting topic. Please join us then.

Speaker 1:

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