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IRS Provides Favorable New Guidance on Safe-Harbor 401(k) Plans

The IRS has provided much-anticipated (and welcome) guidance on mid-year amendments to safe-harbor 401(k) plans. This is favorable guidance that provides greater flexibility to employers that sponsor safe-harbor plans.

Brief Background

Safe-harbor 401(k) plans are excused from performing some nondiscrimination tests in exchange for meeting specified criteria, including providing a minimum employer contribution (either a matching contribution or nonelective contribution) and providing eligible employees with a notice each year. Prior guidance from the IRS (mostly informal) has indicated that employers generally could not make mid-year amendments to safe-harbor plans (unless expressly authorized by the IRS) or would risk losing safe-harbor status for that year. This presumption against mid-year amendments appeared to include amendments to plan provisions that did not relate specifically to safe-harbor status.

A Change in the Presumption

New guidance from the IRS reverses the prior presumption that any mid-year amendment to a safe-harbor plan was prohibited unless expressly permitted. Instead the guidance says that most mid-year amendments are permissible, so long as notice and election requirements are met in cases where the change affects the required content of the safe-harbor notice. Specifically, the guidance provides:

“A change made to a safe harbor plan or to a plan’s required safe harbor notice content does not violate the requirements of [the safe-harbor rules] merely because the change is a mid-year change, provided that (i) if it is a mid-year change to a plan’s required safe harbor notice content, the notice and election opportunity conditions [described in the guidance] are satisfied, and (ii) the mid-year change      Continue Reading...

The Wild, the Innocent, and the Super Bowl Shuffle

Super Bowl Sunday is February 7. About 180 million Americans will watch the game on TV, and 56 million will attend a Super Bowl party. While doing so, we’ll eat nearly 20 million pounds of potato and tortilla chips. Here are some other Super Bowl-related numbers for you to ponder in your role as HR quarterback. (Like many sports fans, I’m also a statistics geek.) 


Productivity Sacked
U.S. employers suffer over $820 million in lost productivity the week before the Super Bowl, according to a consulting firm. That estimate is based on the assumption that the average employee spends 10 minutes a workday talking about the game, planning parties, participating in betting pools, or engaging in other Super Bowl-related distractions. Employers can count on losing another $156 million in unproductive wages on the Monday after the game, when employees discuss their take on the game, commercials, and the halftime show. (Heaven help us if there’s another “wardrobe malfunction.”)
So what should you do about it? Probably nothing (other than the gambling part ? more on that later). While you need to keep things under control and make sure work gets done, cutting employees a little slack to banter about sporting events can improve office camaraderie and boost morale, which in turn may increase productivity in the long run.
A Case of the Super Bowl Mondays
KHRC on Twitter

The Kansas Human Rights Commission announced today that it has joined Twitter.  The Commission says it intends to provide helpful information, resources,  links, and tweets. You can follow KHRC at @KansasHRC. 

KHRC Fields High Number of Harassment Charges

The Kansas Human Rights Commission (“KHRC”) has released statistics regarding employment complaints filed with the agency in the 2015 fiscal year. There were 729 total complaints filed. Of these, 252, or about 35%, alleged harassment. Not surprisingly, sex-based harassment complaints top the chart of all harassment charges. But disability and race-based harassment charges are not far behind. The KHRC also received complaints of harassment based on age, national origin/ancestry, and religion.  

Over three-fourths of the sex-based harassment charges (77.5%) alleged harassment against females. Of the race-based harassment charges, 82% alleged harassment against black employees, 15% alleged harassment against white employees, and the rest involved other races or multi-racial employees.

Similarly, complaints filed with the Equal Employment Opportunity Commission (“EEOC”) continue to include a high percentage of harassment complaints. The EEOC has created a task force to study and address harassment in the workplace. 

Employers have a duty to take steps to provide employees with a working environment free from unlawful harassment—which includes not only harassment by supervisors and co-workers, but also harassment by customers, vendors, and other individuals employees may come into contact with as a result of their employment. Vigilant employers should have strong anti-harassment policies with reporting and investigation procedures. Employers should also provide harassment training and must be ready to swiftly address harassment complaints. As the number of claims continues to rise, and the EEOC ramps up the attention paid to harassment, now is a good time to re-train your supervisors and re-examine the adequacy of your anti-harassment policy and      Continue Reading...

Supreme Court Limits Health Plan Reimbursement Rights

The U.S. Supreme Court has held that a self-insured health plan may not exercise reimbursement rights against a plan participant after settlement proceeds recovered by the participant from a third party have been spent or otherwise “dissipated.”

In the case, the plan paid $120,000 toward medical expenses incurred by the participant after he was injured by a drunk driver. The participant later recovered a $500,000 settlement from the drunk driver. The plan was entitled to seek reimbursement of $120,000 from the settlement, but it did not take adequate steps to enforce its rights. By the time the plan brought suit to enforce its right to reimbursement, the settlement proceeds had been paid to the participant and were gone. The plan attempted to recover the $120,000 from the participant, but the court held that the equitable remedies available under ERISA did not include a right to obtain payment from the participant after the settlement dollars were no longer in an identifiable fund.

The take-away? A self-insured health plan with a right to subrogation or reimbursement must assert its claim while the proceeds of a judgment or settlement are still in an identifiable fund, such as the trust account of the lawyer representing the participant in the personal-injury action. Otherwise, there may be nothing left from which to seek recovery. 

A copy of the court's opinion is available here.

Wellness Program Survives ADA Challenge

In a closely watched case, a federal judge in Wisconsin has denied the EEOC’s challenge to a wellness program maintained by Flambeau, Inc. The EEOC had sued the employer, alleging the wellness program violated the ADA.

The wellness program required employees to complete a health risk assessment and a biometric screening, but employees completing the program didn't just receive a premium reduction or other financial incentive. They were required to complete the program as a condition to obtaining coverage under the employer’s group health plan. Employees that chose not to participate in the wellness program were not allowed to enroll in the employer's health plan. 

The EEOC alleged that the wellness program violated the ADA’s prohibition against involuntary medical examinations and disability-related inquires. Although employees were not required to participate in the wellness program, the EEOC viewed the penalty for nonparticipation (loss of access to the group health plan) as too coercive, effectively making the wellness program an involuntary program. 

But the court side-stepped the question of voluntariness and concluded that a safe harbor under the ADA (which allows for bona fide underwriting activities) applied to the wellness program. Thus, the program did not violate the ADA without regard to whether it was voluntary. 

The court's decision to apply the ADA's underwriting safe harbor is consistent with a 2012 federal appeals court decision (Seff v. Broward County), but the EEOC has indicated it strongly agrees with that interpretation of the ADA. So we might expect further sparring between the EEOC and employers who choose      Continue Reading...

New Year's Resolutions for HR

If you are like most people, you are now a couple of weeks into the new year with a variety of resolutions such as losing weight, getting fit, eating healthier, or getting organized. Without impeding your opportunity for success on your personal resolutions or curing the skeptics who refuse to partake in such resolutions, consider some areas where you can make improvements at work. Do not seek perfection in achieving these goals, but rather evaluate whether there is room for improvement in each area.

1.      Train Managers. While it would be nice to spend weeks designing a comprehensive training program, many of us face time constraints and reluctance from management to allow employees time away from their jobs. Instead of seeking perfection, consider alternative steps to take. Would it be possible to stop by “crew meetings” and do a five minute refresher on sexual harassment? While we all dread meetings, consider if it would be better to do a shorter presentation at a set meeting instead of having multiple meetings to prepare for training. If your workforce is spread out, on-line training may be a good alternative. 

2.      Hold Managers Accountable. We have all met managers who just don’t get it. While training will help with some managers, additional action is often needed to address a manager’s poor work performance or abusive management style. When you become aware of such behavior, discuss the problem with the manager’s boss and make sure the problem is addressed with the manager during the performance appraisal process. 
3.       Retain Relevant Email. If you are like      Continue Reading...
DOL Overtime Regulations Update

The timing of the issuance of DOL's new overtime rule has been a matter of much projection and debate.  Prior to last week, the estimated arrival date for the final rule was summer of 2016.  Last week, the Secretary of Labor expressed his desire to ensure the rule is issued in the early spring of 2016.  Considering the potential for Congressional action and other litigation, the early spring 2016 date makes sense.  A key concern for worker advocate groups is to ensure the rule is published early enough that any Congressional action takes place while President Obama is still in office.  An early spring release meets this key goal.  So for employers working on contingency planning for the new rule, you might move your completion date up a bit if you expected this to be a summer/fall of 2016 activity. 

Christmas Vacation, Free Beer, and the FLSA

In the holiday classic Christmas Vacation, family patriarch Clark Griswold is distressed that he has not yet received his bonus, which he is counting on to cover a check he wrote for a new swimming pool. Finally, on Christmas Eve, a courier arrives with a delivery. As his family looks on, Clark opens the envelope to find, not the bonus he is expecting, but a one year membership in the Jelly of the Month Club. 

Naturally, Clark has an epic meltdown. Well-meaning but misguided Cousin Eddie then kidnaps Clark’s boss and drags him back to the house, so Clark can confront him about cancelling the employees’ bonuses.
“I was expecting a check. Instead I got enrolled in a jelly club. Seventeen years with the company. I’ve gotten a Christmas bonus every year but this one. You don’t want to give bonuses, fine. But when people count on them as part of their salary—well, what you did was just plain …”
“Sucks,” Clark’s son Rusty interrupts.
After looking around the room at the family’s long faces, Clark’s boss has a change of heart and announces that he is reinstating the bonuses. And it’s Merry Christmas to all, and to all a good night—until a SWAT team breaks into the Griswold home to rescue the kidnapped boss, and Uncle Lewis inadvertently triggers a sewer gas explosion.
Promises, Promises
While cancelling a bonus is a great set up for a comedy movie, year-end bonuses can give rise to legal snags that are no laughing matter for employers. Under state      Continue Reading...
J-Law and the ‘Hustle’ for Equal Pay

The final installment of The Hunger Games movie franchise opened this past weekend. And star Jennifer Lawrence (affectionately known to her fans as J-Law) is saturating the media.

But last month J-Law made headlines for another reason: her essay about gender pay inequity. In her rant, J-Law addressed revelations from the Sony Pictures Entertainment data hack that she and Amy Adams were paid less than their male co-stars in American Hustle. When she found out about the pay difference she wasn’t mad at Sony, she was mad at herself, she wrote.
“I failed as a negotiator because I gave up early. I didn’t want to keep fighting over [the money].” A need “to be liked” and fear of appearing “difficult” kept her from demanding more money, she said. And, “based on the statistics, I don’t think I’m the only woman with this issue.”
Does J-Law know what she’s talking about? The data and the law seem to back her up.
Research studies suggest that on average women are less likely than men to negotiate for more pay; and, when they do, they are less likely to be successful and more likely to face backlash. Employers need to be aware of this dynamic, because it can unwittingly lead to pay disparities that expose them to low morale, talent flight, and legal challenges.  
The Equal Pay Act prohibits sex-based wage disparity for equal work at the same establishment. The jobs do not have to be identical, but they must be substantially equal in terms of skill, effort,      Continue Reading...
Leave as an ADA Accommodation: How Much is Enough

Consider this fact pattern:  An employee has a back problem that stretches out over a long period of time.  At some point, the back problem becomes severe enough the employee goes out on FMLA leave.  During the twelve weeks of FMLA leave, the employee ends up scheduling a surgery.  The surgery takes place near the end of the twelve week FMLA period and the employee has a set of lifting restrictions that don't allow the employee to perform the essential functions of the position.  Under those facts, there is no way the employee can return to work at the conclusion of the FMLA leave.  Now what?

Employers face fact patterns like this one on a fairly regular basis.  A reasonable accommodation under the ADA might be to provide the employee with additional leave beyond the protected twelve-week FMLA absence.  These cases are usually fact-specific and can be tricky to resolve.  

A federal court in Wisconsin recently decided a case with this set of basic facts.  In the case, the employee requested another two to three months of additional leave to allow for recovery from the surgery.  The employer denied the request for the additional leave and ended the employment relationship.  As you might expect, the employee brought an ADA claim against the employer.  In what might be a surprise for employers, the court ruled in favor of the employer.  The court focused on the fact the employee had not been able to perform the job duties for the three months during the FMLA leave and that the anticipated two to three additional months was too long for the employee to be away from work.

Keep in      Continue Reading...

Congress Repeals ACA's Auto-Enrollment Requirement

Need something to add to your list of things to be thankful for this year?

As part of the Bipartisan Budget Act of 2015, Congress has repealed the auto-enrollment requirement under Section 18A of the Fair Labor Standards Act (FLSA), which was added by the Affordable Care Act. This provision would have required an employer that has more than 200 full-time employees to automatically enroll any new full-time employee in one of the employer's health plans, unless the employee affirmatively opted out of coverage.

Implementation of this requirement had been indefinitely delayed, pending the issuance of interpretive guidance. As such, employers will not feel any immediate impact from this legislation. But the auto-enrollment requirement raised a number of sticky issues that were likely to present challenges, so the repeal is a welcome development for regulation-weary employers.


New Overtime Pay Regulations: Wait and Hurry Up

Last week a Department of Labor (DOL) official announced that the much-anticipated changes to the overtime pay rules may not be published until late 2016. That’s not a typo—she really did say 2016. But the flip side is that the rules will become effective shortly after they are published. So employers would be wise to start mapping out their potential compliance strategy now, rather than waiting until the final regulations actually drop.     

As you are probably aware, this past June the DOL issued a proposed regulatory change to the “white collar” exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The proposal is to increase the minimum salary that must be paid to employees to be exempt (from the minimum wage and overtime requirements of the FLSA ) for most of the “white collar” exemptions from $23,660 annually ($455 per week) to $50,440 ($970 per week) with annual automatic increases thereafter. This change will apply to all employers with white collar exempt employees, private or public sector, profit or not-for-profit.
Since June 30, the Department has received more than 250,000 public comments, which it is obligated to consider before issuing a final rule. In early November, the Solicitor of Labor, Patricia Smith, said the final rule likely will not be published until the fall of 2016 with an effective date as soon as 30-60 days after publication. Most commentators believe that the Department wants the new rule to be effective before the November 2016 general election.      Continue Reading...
Expanded Deferred Action Program Remains on Hold

In November 2014, President Obama expanded the deferred action program currently in effect.  The expansion would have extended eligibility to participate in the program to about 4 million more individuals currently in the U.S. illegally.  The program extension is currently on hold due an injunction issued by the U.S. District Court for the Southern District of Texas.  The issuance of the injunction was appealed by the federal government.  The Court of Appeals upheld the injunction in a decision issued earlier this week. 

This means the expansion of the deferred action program remains temporarily blocked from implementation until the trial of the matter takes place or the federal government successfully appeals the decision.  Stay tuned.  It will likely be months before this issue resolves itself. 

Happy Veteran's Day

Happy Veteran's Day and a thank you to all who have served or are currently serving!

For employers looking to support veterans, check out the Department of Labor Veterans' Employment and Training Service (VETS) site.  To see more click here.


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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
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Jason Lacey, the Employee Benefits Guy
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