Workplace Wise - Iowa Employment Law Attorneys

Wednesday, November 20, 2013

IRS Issues Final Regulations on Reducing or Suspending 401(k) Safe Harbor Contributions: Employers May Want to Consider Revising Safe Harbor Notices

By Cynthia Boyle Lande

On November 15, 2013, the IRS issued final Regulations covering the reduction or suspension of 401(k) safe harbor contributions. These Regulations build on other final Regulations issued in 2004 and proposed Regulations issued in 2009.

The new Regulations describe the steps that employers must follow to amend a 401(k) to eliminate employer safe harbor contributions mid-year. Employer safe harbor contributions may take the form of non-elective contributions paid entirely by the employer (“non-elective contributions”) or employer contributions which match employee contributions (“matching contributions”). Treasury Regulations typically require that a safe harbor 401(k) plan (whether employer contributions are matching or non-elective contributions) have a 12-month plan year. As a result, employers cannot typically eliminate the safe harbor element from a plan mid-year.
  • Provides employees a supplemental notice explaining the suspension at least 30 days prior to the effective date of the suspension and allows employees a reasonable opportunity after receiving the notice to change their deferral elections;
  • Continues to make safe harbor matching contributions until the effective date of the amendment; and
  • Amends the plan to satisfy ADP and ACP testing (as applicable) and actually satisfies those tests for the entire plan year.
The 2004 Regulations did not, however, allow a similar suspension of safe harbor non-elective contributions.

The new Regulations allow employers to amend 401(k) plans to suspend safe harbor non-elective contributions as well so long as the requirements listed above are satisfied and either of the following is true:
  • The employer is operating at an economic loss for the plan year, or
  • The employer includes with its safe harbor notice distributed to employees prior to the beginning of the plan year a statement that the employer may amend the plan during the plan year to reduce or suspend safe harbor non-elective contributions so long as the reduction or suspension does not apply until at least 30 days after all eligible employees receive a subsequent notice of the reduction or suspension.
These new Regulations are retroactively effective as of May 18, 2009.

To ensure consistency among various safe harbor 401(k) plans, these new requirements also will apply to safe harbor plans with matching contributions beginning January 1, 2015.

The 2004 Regulations allow employers to amend 401(k) plans to suspend safe harbor matching contributions if the employer does all of the following:

What Employers Should Do:

This Year: Employers with safe harbor 401(k) plans providing for employer non-elective contributions should consider modifying the notice that they will provide to employees prior to the beginning of the next plan year. If an employer making non-elective contributions to a safe harbor 401(k) plan does not include the statement described above in its safe harbor notice for the upcoming plan year, the employer will not be able to reduce or suspend non-elective contributions during the year unless the employer is operating at an economic loss.

Next Year: Employers with safe harbor 401(k) plans providing for matching contributions should consider modifying the notice that they will provide to employees prior to the beginning of their first plan year beginning after December 31, 2014. Beginning January 1, 2015, failure to include the statement described above in safe harbor notices for the upcoming year will prevent employers from reducing or suspending matching contributions during the year unless they are operating at an economic loss.

If you have any questions regarding the new IRS rules on reducing or suspending safe harbor contributions or on 401(k) compliance generally, you should contact your BrownWinick employee benefits attorney. 

Tuesday, November 19, 2013

E-Verify and Social Security Number Lockout

By Elizabeth A. Coonan
U.S. Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas announced yesterday that the Federal E-Verify* program has been enhanced to deter fraud by capturing and locking out fraudulently used Social Security numbers.

The new lockout feature prevents potential fraudulent use of SSNs to gain work authorization during the I-9 process. In accordance with normal E-Verify process, an employer will enter an employee’s information into the E-Verify system. If the SSN offered is one that has been locked, E-Verify will issue a Tentative Nonconfirmation (TNC).  The employee receiving the TNC will then need to contact their local Social Security Administration field office to resolve the issue.  The SSN lockout enhancement provides additional protection to employers…but will it end up causing more headaches? Only time will tell.

*E-Verify is a free, voluntary web-based service provided by the Department of Homeland Security that permits employers to verify the employment eligibility of new employees. The use of E-Verify is mandatory for many federal contractors and in several states. E-Verify is not mandatory in Iowa.

If you have any questions about immigration compliance, please contact your BrownWinick Employment Attorney.

Undocumented Workers are entitled to Workers' Compensation in Iowa

By Elizabeth A Coonan

On November 15, 2013, the Supreme Court of Iowa in Staff Management and New Hampshire Insurance v. Jimenez ruled that the Iowa Workers’ Compensation Commissioner can award an undocumented worker healing period benefits under the Iowa Workers’ Compensation Act.  Using the doctrine of “expression unis est exlusio alterius” (don’t worry, we had to look it up too) as standing for the proposition that legislative intent is expressed by omission as well as by inclusion, the Court determined that the definition of “employee” under section 85.61(11) of the Iowa Workers’ Compensation Act is to be read in a broad manner. The court reasoned, “If the legislature intended the definition of a worker or employee to exclude undocumented workers, it would have done so by adding undocumented workers to the list of excluded workers or employees.”

It should be noted that this case dealt only with the issue of entitlement to workers’ compensation benefits, not whether the employer had a legitimate non-discriminatory reason for terminating the undocumented employee. The employee advanced an argument indicating that the employer was aware that she was undocumented when the employee was initially hired. Legally and strategically, this left the employer with no choice but to argue that it was not aware of her lack of work authorization as the knowing employment of an individual not authorized to work in the United States comes with significant risk of fines and penalties.  The moral of this story: Once you have knowledge that a workers is undocumented, you may not continue to employ that individual but he or she may still be entitled to receive workers’ compensation benefits in the State of Iowa.  

If you have questions about workers’ compensation or immigration compliance, contact your BrownWinick employment law attorney.

Friday, November 8, 2013

Anti-Discrimination Law ENDA Passes Senate

By Ann Holden Kendell

On November 17, 2013, the U.S. Senate passed the Employee Non-Discrimination Act (ENDA) – a bill that prohibits businesses with 15 or more workers from making employment decisions based on sexual orientation or gender identity.  Ten Republicans joined with the entire Democrat caucus to pass the proposal 64-32.  A religious exception was provided as an amendment to the bill to "prevent federal, state and local governments from retaliating against religious groups that are exempt from the law."

Citing concerns of frivolous litigation, Speaker Boehner and other House Republicans have already said that they intend to oppose ENDA.  A report from the Government AccountabilityOffice released this summer indicated that in the 22 states where there is some form of anti-discrimination law regarding sexual orientation and gender identity, "the administrative complaint data reported by states at that time showed relatively few employment discrimination complaints based on sexual orientation and gender identity." 

What this means for Iowa employers – the Iowa Civil Rights Act already includes sexual orientation and gender identity as protected classes for purposes of employment discrimination for businesses with four employees or more.  But, with the proposed federal legislation, the heightened awareness and potential federal protections further underscore the need for Iowa employers to review written and unwritten employment policies and practices and include these protected classes in discrimination and harassment training for employees. 

Another practical concern for Iowa employers is to balance the protections for gay and transgender employees with the religious views of other employees.  Religion is also protected under the Iowa Civil Rights Act and Title VII.  Therefore, regardless of the protected class status, managers and employees should not be using any protected class status for purposes of employment decisions or to engage in harassing behaviors. 

If you have questions about employment policies and practices regarding discrimination and harassment, you should contact your BrownWinick employment law attorney.

Monday, November 4, 2013

Unclaimed Property Audits on the Rise

By Katheryn Thorson

With many states in dire need of revenue, unclaimed property audits are on the rise.  Under most states’ unclaimed property laws, a business must remit certain types of property to the state for safekeeping after the business is unable to contact the property’s owner for a specified period.  Additionally, in order to ensure compliance, the laws grant the state the authority to audit businesses, regardless of whether the business has a presence in the state.  If an audit exposes unreported unclaimed property, penalties, interest, and the cost of the audit may be imposed against the business.  With these audits on the rise, businesses should review its procedures and be proactive in reporting unclaimed property.
Generally speaking, unclaimed property is property that is owed to a person, but has not been paid because the owner cannot be contacted.  Common examples of unclaimed property are accounts payable, unused rebates, unclaimed insurance proceeds, unused balances on gift certificates or gift cards, and uncashed payroll, benefit, or dividend checks. 
While most states’ laws are based on a uniform law, each state’s law may vary as to the types of property that is subject to remittance, the dormancy period for each type of property, and the reporting rules.  Additionally, a business may be subject to several states’ laws as a business generally may be audited in any state.  In order to make reporting easier, rules have been established that determine which state a business must report unclaimed property to.    
Typically, an audit begins when the state sends an initial document request to a business.  Audits are usually conducted by third-party auditors that are typically paid on a contingency fee basis, which creates an incentive for the auditors to uncover as much unclaimed property as possible.  Audits can be extremely time-consuming and may last for a period of several months.  If an audit discloses reportable unclaimed property, the state will issue a liability assessment, which may impose penalties, interest, and the cost of the audit against the business. 
In Iowa, Iowa Code Chapter 556 regulates the disposition of unclaimed property, and the Treasurer of the State of Iowa handles all unclaimed property matters.  Under Iowa’s law, businesses with unclaimed property must send written notice to the owners and must turn the property over to the state after a designated time period.  The time period varies depending on the type of property unclaimed, but is usually three years after the property becomes payable.  Additionally, businesses with unclaimed property must file an annual report of all unclaimed property with the Treasurer of the State of Iowa.
In order to minimize liability if an audit is conducted, your businesses should follow these best practice tips:
  • Evaluate the types of unclaimed property that the business may have and what states’ laws the business may be subject to;
  • File unclaimed property reports regularly in all applicable jurisdictions;
  • Establish written unclaimed property policies and procedures;
  • Address unclaimed property in transaction documents;
  • Maintain documentation on owners and unclaimed property;
  • Take advantage of automatic payment options such as direct deposit; and
  • Perform early outreach to owners as soon as payment is available 
Further, if your business receives an audit notice or is concerned about unclaimed property exposure, an experienced unclaimed property attorney and consultants should be engaged.  These professionals can assist in protecting information gathered in connection with the audit and can also assist in identifying defenses.   

Lastly, this posting is intended to provide a broad overview of unclaimed property laws and is by no means comprehensive.  In order to obtain guidance on how the unclaimed property laws are applicable to your business, you should contact your BrownWinick employment attorney.