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California’s New Paid Sick Leave Law

January 26, 2015


Recently the California Legislature enacted Assembly Bill 1522, the Healthy Workplaces, and Healthy Families Act of 2014 which now requires employers in California to provide paid sick leave to almost all California employees. The law became effective January 1, 2015, so California employers should review their sick leave or paid time off (PTO) policies immediately and modify as needed to ensure compliance.

Under the new law, most employees who do not currently receive paid sick leave will now be eligible for sick leave. Beginning July 1, 2015, employees who work in California for 30 days or more within a year will accrue sick leave they may begin using after their 90th day of employment. Employees will be entitled to use accrued sick leave for a variety of reasons, including: the diagnosis, care or treatment of an existing health condition of, or prevention care for, an employee or an employee’s family member. For the purposes of this law the phrase “family member” refers to a child, parent, spouse, domestic partner, grandparent, grandchild, and sibling. An employee who is a victim of domestic violence, sexual assault or stalking is also entitled to use sick leave.

For employers who already provide paid sick leave for their employees, the law will probably not provide employees with additional leave. However employers may face additional restrictions that now apply to the first 12-month period regarding the first 3 days or 24 hours accrued.

In order to implement the provisions of the law, employers will be required to keep records pertaining to paid sick leave for at least three years, including hours worked, accrual and utilization of paid sick leave. Failure to maintain adequate records will result in a presumption that the employee is entitled to the maximum number of accruable hours, unless the employer can prove otherwise.

As California is implementing their new paid sick leave law, President Obama is looking to take similar action to help all states adopt paid sick leave, which would support the 43 million workers who currently have no paid sick leave.

The NLRB Ambush Rule

January 8, 2015


On December 15, the National Labor Relations Board (NLRB) issued a final rule amending the agency’s representation election process. While the expressed intent is to “simplify representation-case procedures, codify best practices, and make them more transparent and uniform across regions”; it primarily reduces the amount of time a group has to respond to an election petition in order to preserve their rights to contest a union election.

If upheld, these changes are expected to make it more difficult for employers to address employee concerns when confronted with a union campaign and will ultimately have a major impact on the union environment.

Some of the major provisions of the final rule include expedited pre-election hearings, obligatory pre-election position statement, post-election declaration of voter eligibility and enclosure issues, removal of post-hearing briefs, and requirement for elections to be set for the earliest practicable date.

The most significant effect of the new rule is that now the union representation election will be within 10-21 days after a petition has been filed. Historically union campaigns have occurred over a six to seven week time frame; however the new rule now makes it an extremely condensed time period. Opponents of the new rule stress that accelerating the election period greatly deprives employees of the chance to obtain essential information before voting.

The rule will become effective on April 14, 2015 though it is likely that there will be challengers before then. Further Details on NLRB Ambush Election Rule can be found here.

Read Our Latest Article Featured in Health Insurance Underwriter

January 7, 2015


Adam Bonsky, EVP of Government Markets, recently wrote an article titled: Opportunity Knocking: Now Is The Time To Serve Government Contractors, which appears in the December issue of HIU (Health Insurance Underwriter). Read More…

Construction Spending Data Released

December 18, 2014


In early December the US Department of Commerce’s Census Bureau released construction spending data for October 2014. It showed that overall construction is improving. Total annual construction spending during October 2014 was estimated at $971 billion, a 3.3% increase above October 2013.

Public construction increased to $279 billion, a 1.5% increase above October 2013. Educational facility construction spending was $64 billion, a 6.1% increase over the previous year. Other public construction areas showing improvement include power, and amusement and recreation. Private construction spending was $692 billion, a 4% increase above October 2013 spending.

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

October 27, 2014


Last week the IRS announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include the following:
•The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
•The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
•The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
•The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
•The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
•The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

Final Rule for Minimum Wage Increase

October 23, 2014


As anticipated, on October 1, 2014 the U.S. Department of Labor (DOL) issued final rule (RIN 1235-AA10) that implements Executive Order 13658, increasing the federal minimum wage for contract workers to $10.10 an hour beginning in January 2015. The final rule has significant implications for employers with workers who will perform work under covered federal contracts or subcontracts.

The final rule identifies important terms used in the Executive Order. It also provides assistance for contractors on their obligations under the Executive Order, including a thorough description of the types of covered contracts, including those covered by the Davis-Bacon Act and the Service Contract Act, as well as concession contracts or any contract in connection with a Federal property when used to provide services to Federal employees.

President Obama signed Executive Order 13658, “Establishing a Minimum Wage for Contractors” in February stating that its intent was to “increase efficiency and cost savings in the work performed by parties that contract with the federal government.”

However, when analyzing the effect of the increase the DOL found that almost 200,000 employees will be receiving a wage increase in 2015 and that means employers who need to cover those $100.2 million of additional wages will likely be passing the costs back to the federal government through higher bids on contract work.

Employers should be watchful about checking whether their contracts will be subject to the terms of the final rule which will apply to new contracts with the federal government as well as with replacements for expiring contracts that result from solicitations issued on or after Jan. 1, 2015 and to contracts that are awarded outside the solicitation process on or after Jan. 1, 2015.

White House Issues New Executive Order on Contractor Fair Pay and Safe Workplaces

August 26, 2014


On July 31, 2014, the White House issued an Executive Order (EO) titled “Fair Pay and Safe Workplaces” that imposes many new requirements on federal contractors. The purpose of the EO is to “increase efficiency and cost savings in the work performed by parties who contract with the Federal Government by ensuring that they understand and comply with labor laws.”

This sweeping EO achieves this purpose by identifying 14 labor requirements, such as the Fair Labor Standards Act, Davis-Bacon Act, Service Contract Act, and National Labor Relations Act, that contractors must report violations and contracting officers can rely to make a responsibility determination when awarding contracts with a value greater than $500,000.

In addition to contracting officers making responsibility determinations when awarding prime contracts, prime contractors must make the same determination in regards to subcontractors when compensation exceeds $500,000.

The EO requires the General Services Administration to create a new website for contractors to report violations and requires each agency to designate a senior official who will serve as that agency’s Labor Compliance Advisor.

This new requirement applies to contracts for goods, services, and construction. The Federal Acquisition Council and the US Department of Labor are also charged with developing regulations but no implementation deadlines were provided. Developing guidance will be a lengthy and complicated process.

Measure to Fund Highway Trust Defers Contributions to Pension Plans

August 15, 2014


Before adjourning for summer break Congress passed a bill to keep the Highway Trust Fund flowing to states through next May. President Obama signed the $10.8 billion measure which provides a large percentage of the money needed to sustain and expand our roads. The fund was set to run out of money at the end of August. Though the passage of the bill did prevent the loss of thousands of jobs, the funding of the bill will adversely affect some workers and their ability to accrue pension savings.

Recognizing that financial support for the Highway Trust Fund could not come only from current federal gas taxes, which are two decades old, Congress decided to allow companies to defer required contributions to certain defined benefit pension plans. Their reasoning was that letting corporations make smaller pension contributions now will subsequently lead to an increase in corporate profits and tax revenues from those profits which will theoretically cover the cost of the payment to the Highway Trust Fund.

While Congress was trying to avoid negatively impacting workers, some critics claim Congress overlooked a bigger issue, that of encouraging companies to defer pension plan contributions, which could have an adverse effect on some employees. And since pension plan contributions will be deferred they will have to be made later — thus decreasing future corporate profits and tax revenue.

As President Obama pointed out when signing this measure, it is only temporary and not intended as a long-term solution. Congress should be expected to find ways to cover the costs of the Highway Trust Fund in the future without impacting worker’s pension plans.

Fringe Benefit Requirement for Service Contract Act Increased to $4.02

July 31, 2014


The Department of Labor has released its annual memorandum which specifies a rate increase for Service Contract Act (“SCA”) health and welfare fringe benefits. The new rate is $4.02 per hour, a 5.5% increase, and becomes effective July 22, 2014.

The new rate will be required in all invitations for bids opened, or other service contracts awarded on or after July 22, 2014. The contracting officer may adjust bids submitted using the old rates without obtaining a new wage determination before issuing the new contract. For existing service contracts, the new rate will go into effect on the anniversary date or the option renewal/modification date, depending on the terms of the contract.

The rate in Hawaii is dependent upon whether an employee is insured pursuant to the state’s mandatory health care law. Contractors operating in Hawaii should review the DOL memorandum and their applicable wage determination requirements.

President Obama Signs Executive Order Prohibiting Federal Contractors from Discriminating Against LGBT Employees

July 25, 2014


As anticipated, on July 21 President Obama signed an Executive Order (EO) banning federal contractors from discriminating against lesbian, gay, bisexual and transgender (LGBT) employees. The new EO amends two existing orders, 11246 and 11478, by adding sexual orientation and gender identity to the list of categories of protected federal contractor workers. The White House predicts that these changes will impact about 24,000 companies with federal contracts that together employ over 28 million workers – a fifth of the country’s workforce.

Obama’s new EO revises the existing 11478 by formally adding gender identity to the list of protected categories. This change will take place immediately and identifies the Equal Employment Opportunity Commission (EEOC) as being responsible for directing and furthering the implementation of the rule.

Additionally, the new EO amends 11246 by adding provisions that prohibit discrimination and require affirmative action on the basis of sexual orientation and gender identity. The US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) will be responsible for these changes and has been given 90 days from the date of the order to prepare regulations for implementation. However, preparation of these regulations will likely take longer than 90 days due to the federal regulatory process which requires public notice and the opportunity to submit comments.

At this time the new EO does not permit for any additional exemptions for religious entities beyond those which were added by President George W. Bush several years ago.

Obama supports legislation that would bar most employers, not just federal contractors, from discriminating against LGBT workers; but since Congress has not acted Obama pursued executive action to protect the portion of the US workforce over which he has some control.