November Bulletin 2014

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Reduce Your Liability for Retirement Plan ErrorsPeggy Hoyt-Hoch Esq., SPHR, CBP, GBA, Employment Law Services Attorney

One of the most obvious fiduciary requirements is to follow the terms of your plan document, as long as those terms are consistent with the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. That clause—as long as they are consistent with ERISA— is always the tricky one. Why is that?

Often we hear of the newly hired human resources employee who is sim-ply “taught” by his or her predecessor how to handle the retirement plan functions. The workflow, administrative, and reconciliation processes that have been in place are simply followed by each successive plan adminis-trator. The new employee paid attention, took notes, and diligently carried out the instructions as taught. Perhaps even you have had this experience.

You are asked whether the plan allows a loan. Yes, you explain. Follow these procedures, complete this application, attach the documentation, and we will authorize the loan as long as the require-ments are met. What is the maximum loan available? You confidently respond that the participant may borrow up to 50 percent of her vested account balance, to a maximum of $50,000. This is pre-cisely what you were taught, what your plan has always done, and what your plan document states. We should always follow the plan document, right? Well, only if the document is consistent with ERISA. Here, one key step is missing.

In this example, the consultant the employer hired to conduct the self-audit discovered that the plan document had left off one important point in describing loan maximums. That is, the legal require-ment that when a participant applies for a loan, the plan must look to see whether that participant had a plan loan within the last 12 months. If so, then the highest outstanding loan balance over the most recent 12 months must be deducted from the maximum amount described above. This signifi-cantly reduces the maximum loan amount available to a number of participants. Failure to follow this step in loan processing places the retirement plan out of compliance with ERISA. The regulations on maximum loan amounts are clear. Yet, on occasion, a plan document will omit this requirement. On other occasions, a plan document may include it, but staff only follow what they are taught, rather than read the document themselves and learn ERISA! Failure to process participant loans properly is one of the more common failures the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) see as they accept retirement-plan-correction applications.

To reduce your risk of fees, penalty assessments, participant or class-action lawsuits, and even poten-tial plan disqualification, sponsors are encouraged to monitor their plan administration and conduct

Reduce Your Liability for

Retirement Plan Errors

Page 3Human Resources’ Role

in the Business Lifecycle

Page 4 You Asked!

How Should I Handle the Extra Payday in 2015?

Page 5 Have You Checked Your

Credibility Quotient?

Page 6Are You Ready for Changes

to Colorado Wage and Discrimination Claims

Effective in 2015?

Page 8State Maternity Leave Law Cannot Require Employer

to Change ERISA-Protected Short-Term Disability Plan

Page 9 Public Sector:

The Fourth Amendment and the Expectation of Privacy

Page 10 Survey News

EMPLOYMENT LAW | SURVEYS | HUMAN RESOURCES | TRAINING

TheBulletinNOVEMBER 2014

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2 | The Bulletin | November 2014 | MSEC.org

periodic self-audits on plan documents and operating procedures. Quite often, plans that begin routine audits will catch their errors well before a participant claim or an agency auditor steps in. By self-identifying plan errors, following agency procedures, and making the required corrections, plan sponsors are able to save significant sums of money, enhance employee relations, and protect their company’s reputation from negative publicity.

Some of the common errors found in self-audits and the agency process offered to correct, document, and pro-tect the plan in the future are shown below. There are many types of errors not listed here. The corrections may be time intensive and many plan sponsors obtain assistance from their plan providers, third party administrators, plan auditors, and ERISA attorneys.

Common Errors and Correction Programs Available:

• Missed Form 5500 filings: Delinquent Filers Voluntary Compliance Program (DFVC) with DOL

• Delayed Deposit of Employee Deferrals: Voluntary Fiduciary Correction Program (VFCP) with DOL; may also need to follow up with an IRS Employee Plans Compliance Resolution Systems (EPCRS) program

• Plan Loan Errors: one of the EPCRS programs with the IRS; then Voluntary Compliance Procedure with DOL

• Overpayment/Underpayment Errors: one of the EPCRS programs with the IRS. (Three are offered and the facts determine which is most appropriate.)

• Failure to Adopt Plan Amendments: an EPCRS program with the IRS. [Refer to IRS Notice 2014-84 for the list of Plan Qualification Requirements: http://www.irs.gov/irb/2013-52_IRB/ar13.html]

• Conflicting Definitions of Eligible Compensation: one of the EPCRS programs with the IRS

• Failed Non-Discrimination Tests: one of the EPCRS programs with the IRS £


Human Resources’ Role in the Business Life CycleChelsea Jensen, MBA, Human Resource Services Consultant

Picture this: you wake up in the middle of the night with the brilliant idea that you want to start your own business. For years, you have had a pas-sion for making computers and you believe that your business could be more successful than anything the late Steve Jobs could have imagined. Although it is late, you jump out of bed and start drafting your busi-ness plan. While there is a lot to think about, you know that factoring in Human Resources (HR) will help your business in many ways, even if it does not succeed.

Starting up- You have relationships with people in the computer indus-try and believe they will want to join your new business; however, you

will need to hire additional help. HR can make sure you hire candidates with the appropriate knowledge, skills, abilities, education, and experience. You do not have time to waste hiring the wrong person. How will you pay your new employees? Without a compensation system, candidates may ask for unreasonable salaries. Further, how will you classify jobs as exempt or nonexempt? HR can devise a compensation plan that fits your new busi-ness and make sure it is legally compliant.

Growth- Many consumers are interested in your new computer product as it offers the same features the Apple computer does, but costs less! Your business’s competitive advantage causes it to grow significantly. As the com-pany grows, HR will help the business comply with numerous state and federal regulations (i.e., when you reach 50 employees and become covered by the Family and Medical Leave Act). HR can also benefit the businesses in the growth phase by identifying training needs for existing staff. HR may conduct a needs assessment for the current workforce to determine the skills, training, and employee development necessary for the company to prepare for growth. Developing staff can be much less expensive than hiring additional staff or more qualified candidates. In addition, this strategy could reduce turnover and improve employee retention.

Plateau- Your company has been making consistent revenue for the past 12 months, but it is not experiencing the type of growth it was before. Employee morale has decreased because of the subsided growth. HR gener-ally owns the task of creating a more engaged workforce. This may involve creatively redefining work structures and realigning rewards. Further, HR, as a strategic partner, can help with the overall business strategy to stimulate growth.

Decline- Apple has launched a new computer product that your company simply cannot compete with. Your revenues are significantly declining and you know you will have to file for bankruptcy. Your employees will inevi-tably lose their jobs, but HR will be able to help. Aside from helping deliver the tough message to employees, HR can prepare the health care continuation paperwork for those losing coverage. Many employees will file for unemployment, and HR can manage the claims received.

Although the business was not successful, HR played a significant role throughout its life cycle. Where does your business fall in the cycle? As you plan for the upcoming year, think about how you can leverage HR to help achieve your goals and keep you out of the decline. £


You Asked: How Should I Handle the Extra Payday in 2015?Laura Woods, MA, SPHR, CPP, Human Resource Services Consultant A calendar anomaly will create and extra payday for some companies in 2015. Many companies’ first payday of 2016 will fall on Friday, January 1, 2016. Because that is a fed-

eral holiday, companies on that schedule may choose to pay on Thursday, December 31, 2015. This means that employees who are paid weekly on Fridays will see 53 paydays, instead of the usual 52. Likewise, employees who are paid bi-weekly will receive 27 paychecks. Companies that choose to pay on January 1, 2016, will see the extra paycheck in 2016.

While employees paid either monthly or semi-monthly are not affected, thousands of salaried employees paid weekly and bi-weekly are. This can affect payroll budgeting for the year.

For example, if an employee earns $52,000 a year and is paid every other Friday—26 times during a typical year—that base salary is generally divided by 26, earning the employee $2,000 every two weeks. With an extra pay date in 2015 or 2016, the budget will look like that employee earned $54,000 in the year.

But because most companies subtract payroll from the budget for when the work was actually done—not when the paycheck is written—for most companies that had a paycheck on Jan. 1, that expense will actually come out of the 2015 budget. When you pay an annual salary on a bi-weekly basis, for example, what you are really saying is, “In 26 pay periods, I’ll pay you this amount,” not, “For this exact calendar year of work, I’ll pay you this amount.”

Under the Fair Labor Standards Act, nonexempt employees must be paid each payday at their hourly rate for all hours worked, so there can be no adjustments. It is legal to reduce an exempt employee’s income per check as long as the total yearly amount is paid and there was no agreement on the specific amount of the employee’s weekly or biweekly salary. However, it does result in getting less pay for the same amount of work. If you have offer letters that quote a weekly or bi-weekly rate for salaried employees, it is not recommended you reduce employees’ pay.

Think of it this way: Even though you are issuing the employee one extra paycheck, the amount of work is the same, and one of those checks is for work done in the previous year, and/or some of their work will actually be paid in the following year.

In addition, it will be important to look at how benefits are deducted from an employee’s paycheck. If your com-pany has benefits set up to come out of paychecks 24 times a year, you will not be affected. If you deduct from every paycheck on a weekly or bi-weekly basis, you should assess all benefits, including but not limited to flexible spending accounts and any retirement benefits that could reach the annual cap. £


Have You Checked Your Credibility Quotient?Kate Bartlett, MA, SPHR-CA, Human Resource Services Consultant

Dishonesty, and the hubris that may accompany it, erodes trust, under-mines relationships, and breeds cynicism. It may even cost billions of dollars, as in the case of so many corporate scandals. When dishonesty is exhibited by our leaders, it typically has corrosive and costly effects, and can cause people to withdraw or disengage.

Public disclosure of wrongdoing, whether about an individual or an insti-tution, provides each of us with an opportunity to step back and examine

our own behavior, as well as our motivations/intentions. James Kouzes and Barry Posner conducted research into what makes great leaders (Credibility: How Leaders Gain and Lose It, and Why People Demand It, 1993). Not sur-prisingly, they found that credibility was at the top of the list.

What is credibility? Leadership credibility is a quality or characteristic that enables staff to view the leader as a trustworthy resource for information and decision making. It is a quality that results from a constellation of positive behaviors like:

• Lifting people’s spirits

• Leading by example

• Paying attention

• Participating directly in the process of getting extraordinary things done

Research shows that leader credibility has significant positive effects on staff. And, it does not just have a positive impact on staff relations. It can also affect vendor, customer, and investor relations. But credibility isn’t something that comes with a title or seniority. It is earned.

So, what can leaders do? Here are some specific behaviors that can contribute positively to a leader’s credibility.

• Strive to be scrupulously fair and even-handed in all your interactions.

• Hold yourself to the same high standards to which you hold your staff and others.

• Be accountable for your decisions and your actions.

• Follow through when you say you are going to do something, no matter how seemingly “small” the issue.

• Make sure your behavior is consistent.

• Unfailingly demonstrate trust. Trust is demonstrated when you delegate responsibility and show confidence in your staff’s ability to execute their job responsibilities safely, compliantly and competently.

Quite simply, if staff don’t believe the messenger, they won’t believe the message. Have you checked your credibility quotient today? £


Are You Ready for Changes to Colorado Wage and Discrimination Claims Effective in 2015?Diane Waters Esq., Employment Law Services Attorney

As we enter the fourth quarter of 2014, it serves as a useful reminder that two significant Colorado employment laws will be coming into effect on January 1, 2015. They are the Colorado Wage Protection Act of 2014 (WPA), which establishes new administrative procedures to adjudicate wage claims, and the Job Protection and Civil Rights Enforcement Act of 2013, which strengthens the remedies available to employees who prove causes of action under the Colorado Antidiscrimination Act (CADA). This article briefly summarizes each law.

Colorado Wage Protection Act (WPA): As it stands now, former employees may make written demands to recover unpaid wages from their employ-ers within 60 days of termination (possibly including penalties and attorney’s fees) or file complaints with the Colorado Department of Labor and Employment (CDLE). Currently, the CDLE has limited enforcement powers to recover unpaid wages. The WPA, however, expands available remedies to current employees and enhances the administrative and enforcement process for wage claims.

Under the WPA, current and former employees may make written demands for unpaid wages and compen-sation, including claims for state minimum wage violations, at any time wages are owed, including when they are still employed by their employers. The WPA creates a new administrative process that will apply to wage claims of $7,500 or less (exclusive of fines and penalties) earned on or after January 1, 2015. Employ-ees will have two years, rather than 60 days, to submit complaints, and up to three years for willful violations. Wage claims can be initiated by filing a complaint with the CDLE or by filing in small claims court. Examples of common wage claims that will be subject to this process include: overtime, minimum wage, final pay, vaca-tion pay, tipped employee wages, unpaid lunch periods, deductions from pay, and bonus and commission payments.

Upon receipt of a complaint, the CDLE will initiate an investigation by sending the employer a notice of the complaint. The employer must pay the amount claimed or submit a written response to the CDLE within 14 days from when the notice is sent. Employers who fail to respond within this tight deadline will be charged a $250 fine. Accordingly, it is critical for employers to review complaint and response procedures and train staff. The CDLE will issue a determination of whether wages are owed within 90 days of the notice of complaint and issue a citation and notice of assessment for any wages owed, plus any penalties and fines. Either party may appeal the initial decision to an administrative hearing. After a hearing, any party dissatisfied with a decision will be able to appeal the decision to the appropriate district court. The CDLE just issued proposed regula-tions governing this hearing process that are similar to those used in unemployment benefit claims. A public hearing on the WPA proposed rules has been scheduled for November 4, 2014. MSEC will attend the hearing and plans to deliver a special briefing session for our members on the details of the WPA’s proposed rules in the near future.

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The WPA also requires employers to retain payroll records for at least three years after payment of wages and to make such records available to both the employee and the CDLE upon demand. Employers must include all of the following information on employees’ itemized pay statements: gross wages earned, all withhold-ings and deductions, net wages earned, dates of pay period, name of employee or employee’s Social Security number, and employer’s name and address. Employers who violate this recordkeeping requirement may be fined up to $250 per employee, per month, up to a maximum fine of $7,500.

CADA Amendments: The CADA prohibits workplace discrimination based on protected status and covers any person employed by an employer (except domestic service and certain religious organizations or associations). Although the CADA covers more employers and establishes broader protections than federal law (e.g., sexual orientation), remedies for CADA violations are currently limited to lost wages, the value of lost benefits, and reinstatement. However, for claims accruing on or after January 1, 2015, the Job Protection and Civil Rights Enforcement Act of 2013 will permit employees to recover front pay, compensatory damages, punitive damages, and attorney’s fees. The cap on the combined amount of compensatory and punitive damages recoverable will be tied to employer size and ranges from $10,000 for employers with one to four employees up to $300,000 for employ-ers with 501 or more employees.

Given the enhanced enforcement mechanisms and greater damages available to employees, including attorney’s fees, MSEC anticipates an increase in the number of wage complaints and discrimination charges filed with state agencies. Regarding the WPA, employers should review their pay and document retention practices, establish procedures governing the receipt of, and response to, complaints, and train impacted staff. Careful attention is required as technical violations, like late responses or failures to retain required documentation, can lead to finan-cial penalties. Additionally, as the wage complaint process has been opened up to current employees, staff should be trained to prevent retaliation claims. Regarding the CADA amendments, employers should review their harass-ment and retaliation prevention policies and procedures, and invest in updated harassment prevention training for managers, supervisors, and employees. £

Confused? Need additional information?

Your MSEC membership includes access to FYIs, Laws, and Links. FYIs are practical white papers explaining employment law or HR topics. Law documents are copies of the actual law. Related links are outside sites with helpful information on each topic.

They are easily accessible, organized by topic, and updated to reflect any changes. Check it out at MSEC.org


State Maternity Leave Law Cannot Require Employer to Change ERISA-Protected Short-Term Disability Plan Dave Smith Esq., Employment Law Services Attorney

Have you ever wondered what would happen if a state law conflicted with your short-term disability (STD) plan regulated by the Employee Retire-ment Income Security Act (ERISA)? That was the issue in a recent case where the Sixth Circuit Court of Appeals held that ERISA prohibits state law from requiring a plan sponsor to change its STD plan. Sherfel v. Newson (6th Cir. 2014).

The employer in the case was Nationwide Mutual Insurance Company. Nationwide does business in 49 states, including Wisconsin, and provides eligible employees with paid-time off benefits, including STD benefits, pursuant to an ERISA plan. Specific STD rules govern a woman’s leave after birth of a child. A woman on leave receives pay through a “Your Time Off” plan similar to a traditional PTO plan for the first five days. After those five days, the woman is eligible for STD benefits for six weeks or eight weeks depending on the type of delivery.

Wisconsin has its own family and medical leave act (WFMLA) in addition to the federal Family and Medical Leave Act. The WFMLA requires employers with 50 or more employees to provide six weeks of unpaid maternity leave after the birth of an employee’s natural child. However, specific language in the law requires employers to allow an employee to substitute paid or unpaid leave of any other type provided by the employer for the unpaid leave. The state agency enforcing the WFMLA interpreted it to require Nationwide to pay a woman on maternity leave even if the time off exceeds the STD plan payout maximum or if the time off does not meet the plan’s definition of disability.

Nationwide sued claiming that ERISA prevented the WFMLA from changing its STD plan. The Sixth Circuit agreed. ERISA supersedes (with exceptions) “any and all state laws insofar as they may now of hereafter relate to any employee benefit plan.” Therefore, because ERISA preempts state law, the WFMLA could not force Nationwide to change its STD plan. The court further explained that ERISA also allows plan sponsors to be able to provide the same group plan to its employees regardless of the state in which they were employed. In other words, Nation-wide could have had to provide 49 different STD plans if each of the 49 states it operates in had a state law on group STD benefits plans.

This ruling that ERISA preempts state laws relating to employee benefits plan has been consistently applied since Congress passed ERISA in 1974. This should make employers comfortable in today’s world where many employment laws not related to employee benefits, such as living wage or ban-the box, are started at local or state levels. £


The Fourth Amendment and the Expectation of PrivacyLorrie Ray, Esq., SPHR, Director of Membership Development

A recent case involving school officials in Virginia who spied on a teacher brings to light issues of privacy under the Fourth Amendment. In this case, the court sided with the school officials, granting them qualified immunity against the former teacher’s claim. The teacher claimed officials violated his rights by monitoring him in his office with a video camera hidden inside a stuffed animal. Chadwell v. Brewer (W.D. Va. 2014).

Chadwell worked as a special education teacher. At some point during Chadwell’s employment, his supervisor suspected that he was drinking alcohol in his office during school hours. Rather than speaking to Chadwell, his supervisor placed the video camera in Chadwell’s office. The camera caught Chadwell drinking a beer at his desk, which eventually led to his termination.

The court first had to determine whether Chadwell had a reasonable expectation of privacy in his office. Employ-ers can limit such expectations by having policies that spell out areas at work where there is no expectation of privacy. Common items and places in policies include places or property owned by the public entity such as desk drawers, lockers, and computers. Public employee offices are employer property and not typically seen as private; however, courts will review the facts in any case. The more the office, or items in the office, are in plain view or open to the public or other employees, the less likely there is to be a reasonable expectation of privacy. By con-trast, Chadwell’s office was at the end of a dead-end hallway and was rarely visited by anyone other than another teacher’s aide who stored her belongings there. The court held that Chadwell likely had some expectation privacy in his office.

After weighing Chadwell’s reasonable expectation of privacy against the officials’ intrusion, the court ruled the intrusion into his privacy appeared on its face to be reasonable. The court ruled this way for two reasons:

• There was reasonable suspicion to believe that Chadwell was engaged in prohibited behavior.

• The officials only used the camera “over a limited period of time to confirm or deny” their suspicion, and did not intrude into Chadwell’s privacy unduly.

If you need to gather information about an employee’s activity, do so in a way that will not create a Fourth Amendment action. Make certain you have good information and reason to believe wrongdoing is occurring, and then only intrude as much as necessary to gather the information needed to determine what is occurring. £


Notice of Surveys Currently Being Conducted2014 Paid Time Off Survey Arizona, Colorado, and WyomingWant to see how your organization’s paid time off benefits compare to other organizations? If so, MSEC is currently conducting the Paid Time Off Survey and we need your support!

In addition to vacation plans, this survey collects information on paid holidays, sick leave, personal time, and consoli-dated annual leave plans. Also collected in this survey is information on bereavement leave, jury duty, military leave policies, and paid-time-off benefits for part-time employees. There is still time to participate! Deadline is November 7, 2014.

Invitations for online participation were sent via email to authorized individuals. If you would like to participate or have not received an email, please call the surveys department. A hard-copy questionnaire is also available on the website at MSEC.org under “Survey Questionnaires.”

Survey Highlights2014 Planning Packet (2015 Projections) Arizona, Colorado, and Wyoming2015 Pay projections are now available. This survey includes information on pay and pay structure projections for the upcoming year. This information is displayed by Industry, Geographic, and Employment Size. Following are the pro-jected pay increases for 2015 by Geographic Region. A more detailed report can be found on the website at MSEC.org.

2014 Health Care Compensation SurveyThe 2014 Health Care Compensation Survey is now available. The survey features two sections, one for hospital and 24-hour operations featuring 251 positions as well as a Clinic section with 37 surveyed positions for a total of 288 positions. Out of the 251 jobs, there were three new positions and one position that had a job description change in this year’s survey. Hospital executive positions are also included in a separate appendix in this survey.

The survey includes wage data submitted by 42 hospitals and clinics located in Colorado and Wyoming. In addition to the Front Range, Colorado participation also includes the Western Slope and Mountain Resort areas.

In addition to salary data, participants also reported percentage increases in pay and pay ranges for 2013 and projec-tions for 2014 and 2015 for the following categories: Nurses, Managers/Supervisors, and All Other Employees. Wage and Supervisory/Management data are displayed by Geographic Location, All Colorado without Government and Clinics, and Net Operating Revenue (under $250,000,000 and $250,000,000 or more) when sufficient data are reported.

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Denver/Boulder 2.8%

Northern Colorado 2.7%

Colorado Springs 2.1%

Pueblo 2.6%

Western Slope 2.6%

Resort Areas 3.2%

Wyoming 2.3%

All Organizations (CO & WY) 2.7%

Arizona 2.9%


Thank you for reading The Bulletin

Special StudiesElectricians, Heavy Equipment Mechanics and Welders Select Mining and Oil & Gas Companies 8 organizations 10B/14

Parks & Recreation Positions Select Colorado Western Slope Organizations 4 organizations 11B/14

Want to participate?If you would like to participate in any of the above surveys and have not received a questionnaire, please call the Surveys Department. You can also download the questionnaire from our website at MSEC.org.

As always, it is the participation of our members that helps make MSEC surveys the number-one data source for the region. Thank you!

To request copies of the surveys, please contact the MSEC Surveys Department. Copies of these resources are available to authorized personnel of MSEC members. Call 800.884.1328, email [email protected], or go online to MSEC.org.

2014 Financial Industry Compensation SurveyThis annual salary survey reports data for 76 positions in 35 financial institutions throughout Colorado and Wyoming. Data for surveyed jobs are displayed by geographic location and Bank/Credit Union. Participants with multiple loca-tions reported institutions within the same geographic area under one questionnaire.

The General Information section includes percentage increases in pay and pay structures for 2013, 2014, and projec-tions for 2015 for officers, non-officer management and nonexempt employees.

November Bulletin 2014

Documents

Transcript of November Bulletin 2014