Per Diems – Vexing Part of Average Weekly Wage – One Easy Fix

I was reading an article written by John Kamin, Attorney on his blog concerning per diems.  Even though

the article and case were on California claims, two of the article’s conclusions rang very true –

–  When evaluating whether to include a per diem in an AWW calculation, ask yourself, “Was this an overly beneficial per diem? Was it more than the average person would spend?”

–   If “yes,” then it should be included in the AWW. If “no,” or if it’s just a strict reimbursement of costs, then it should not be factored into the AWW calculations.

Per Diems – Not Overly Beneficial

Many companies have removed their expense reimbursement structures and substituted these rates.  Truck drivers have long used per diem rates.   The Internal Revenue Service has a great website for information.

From IRS Publication 535 –

The employee has to use the GSA per diem rates for each city which can be burdensome.  The high-low method keeps overly beneficial rates of reimbursement from occurring even though the rates may seem low for certain areas.

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High-low method. This is a simplified method of figuring the federal per diem rate for travel within the continental United States. It eliminates the need to keep a current list of the per diem rate for each city.

Under the high-low method, the per diem amount for travel during January through September of 2021 is $292 ($71 for M&IE) for certain high-cost locations. All other areas have amper diem amount of $198 ($60 for M&IE). The
high-cost localities eligible for the higher per diem amount under the high-low method are listed in Notice 2020-71, available at IRS.gov/irb/2020-40_IRB#NOT-2020-71.

Effective October 1, 2021, the per diem rate for high-cost locations increased to $296 ($74for M&IE). The rate for all other locations increased to $202 ($64 for M&IE). For October, November, and December 2021, you can either
continue to use the rates described in the preceding paragraph or change to the new rates. However, you must use the same rate for all employees reimbursed under the high-low method.

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These rates would not be overly-beneficial as they are the rates supplied by the IRS.   The M&IE rates are for meals and incidental expenses if the lodging rates are not considered in the reimbursement.  They may seem low, but they will make the idea of reimbursements much easier and not have to worry about them being overly beneficial to the employee.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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