Department of Labor

Article Dean Dorton

The Department of Labor (DOL) issued a final rule on May 21, 2020 that establishes a new voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail. Retirement plan administrators who comply with the safe harbor will satisfy their statutory duty under ERISA to furnish covered documents to covered individuals. The new safe harbor permits the following two optional methods for electronic delivery:

  • Website Posting. Plan administrators may post covered documents on a website if appropriate notification of internet availability is furnished to the electronic addresses of covered individuals.
  • Email Delivery. Alternatively, plan administrators may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

The new safe harbor is effective 60 days after its publication in the Federal Register (July 20, 2020). Plans that rely on the new safe harbor will be able to eliminate significant materials, printing, and mailing costs associated with furnishing printed disclosures. In addition, the DOL as an enforcement policy, will not take any enforcement action against a plan administrator that relies on this safe harbor before that date, which provides flexibility and may reduce administrative burden on employers and pension plan service providers during this unprecedented time.

DOL Final Rule

Article Dean Dorton

In November, the Department of Labor (DOL) began sending emails to plan sponsors alerting them of the importance of obtaining a quality audit from a qualified and experienced CPA firm. The timing of the DOL communication is intended to coincide with the period when many plan audit contracts are renewed or out for proposal.

The Department of Labor letter refers to the recent DOL audit quality study which found deficiencies in nearly 40% of employee benefit plan audits (DOL study found at www.dol.gov/ebsa).  The DOL letter also states that employee benefit plan audits have unique audit and reporting requirements and are different from other financial audits, and that substandard audit work can be costly to plan administrators and sponsors.

According to the DOL study, CPA firms that were members of the AICPA Employee Benefit Plan Audit Quality Center tended to produce audits that have fewer audit deficiencies. Dean Dorton is a member of the AICPA Employee Benefit Plan Audit Quality Center and audits nearly 100 plans annually, including defined benefit, defined contribution and health and welfare plans. Over the past few years, several of the plans we audited were inspected by the DOL with no significant findings.

For more information, contact Jim Tencza, Director of Assurance Services, at jtencza@deandorton.com.


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Article Dean Dorton

The U.S. Department of Labor (DOL) recently announced a significant proposed change to the wage and hour rules under the Fair Labor Standards Act.

Background
The current rules generally require employers to pay an employee one and one-half times an employee’s regular pay rate for hours worked over 40 in a work week. However, the rules exempt certain “white collar” employees from the overtime pay requirement.

To fit within this exemption, each of these tests must be met:

  1. “Salary basis test” – The employee must be paid a fixed salary that is not subject to reduction due to variations in the quality or quantity of work performed.
  2. “Salary level test” – The employee’s salary must exceed $455 per week ($23,660 annually).
  3. “Duties test” – The employee’s primary job duties must involve executive, administrative, or professional duties.

Proposed Change
The DOL proposes changing the “salary level test,” increasing the threshold from $23,660 to $50,440 (with a provision for future annual adjustments). The DOL has characterized the salary level test as being the “best single test” of exempt status. Information from the Department of Labor can be found at  https://www.dol.gov/whd/overtime/NPRM2015/.

Impact
Based on 2013 data, the DOL estimates that this change may impact over 20 million workers, about 15% of all U.S. workers. As we understand, no effective date has been established for finalizing the proposed rule changes. A short period for submitting comments from interested parties on the proposed changes closes on September 4, 2015.  Many businesses, industry associations, and other organizations have identified major impacts from the proposed rules, if finalized. Here are just a few such impacts:

  • Employers will be required to reassess exempt status for employees in salaried positions earning less than $50,440 and to strategize about how to address these employees’ situations.
  • Employers may need to revise labor cost budgets and the pricing of their products and services to find the dollars needed for additional overtime pay or adjustments in annual salaried compensation.
  • Employers will need to consider all staffing options to determine the most cost effective manner in which to operate and alleviate the added overtime pay burden.
    • This may include a staffing model favoring more part-time staff.
    • Employers may explore ways to reduce headcount.
    • Employers will need to assess pay practices for seasonal workers and flex-time working arrangements.
  • Employers may need to create new systems and policies to govern the approval and control of overtime work.
  • Employers may need to upgrade or implement technology (software and hardware) to manage the entirety of the payroll process.

For further information, questions, or guidance, please contact Jim Green, Director of Accounting & Financial Outsourcing, at jgreen@deandorton.com or (859) 425-7615.

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