On November 18, 2019, we wrote about the Department of Labor’s final rule raising the salary threshold for overtime pay to $35,568 beginning on January 1, 2020. Have you considered how the increased overtime exemption will affect employee benefits?
Beginning January 1, 2020, certain employees who were exempt from overtime pay will be reclassified as nonexempt, while others will receive pay increases to maintain exempt status. For employer-sponsored retirement plans, these changes could result in issues with nondiscrimination testing. It could also result in increased costs to the employer. For example, a plan that recognizes overtime pay when calculating employer-matching contributions will incur an increase in elective deferrals if more employees are classified as nonexempt beginning in January 2020. This increase in deferrals will result in an increase in employer-matching contributions as well.
Many employers also use exempt and nonexempt status to determine eligibility for certain employee benefits such as group health insurance, education assistance, holiday pay and paid time off, employee discount programs, or group life insurance. An increase in the number of nonexempt employees may result in an increase in the cost and effectiveness of the benefit offered.
What Does This Mean For You? If you haven’t done so already, you should assess your current workforce to determine the impact of the increased overtime exemption threshold. You should also evaluate your establishment’s plans and policies to determine which employee benefits will be affected by the change. In doing so, you will be able to better budget for the impact of the increased overtime exemption or make appropriate adjustments to the benefits offered to employees.
If you have any questions or concerns about this update, or any other employment or labor law questions, please contact Grace C. Nguyen Bond at firstname.lastname@example.org or (717) 509-7226, or S. Whitney Rahman at email@example.com or (717) 509-7237.
**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist.**