U.S. DEPARTMENT OF LABOR ANNOUNCES ENHANCEMENTS TO ASSIST EMPLOYEES, EMPLOYERS AND OTHER STAKEHOLDERS IN USE OF FAMILY AND MEDICAL LEAVE

Today the U.S. Department of Labor’s Wage and Hour Division (WHD) announced significant steps to streamline optional-use forms that workers can use to request, and employers can use to coordinate leave under the Family Medical Leave Act (FMLA). Cheryl Stanton, the WHD administrator, stated that “The improvements we announced today reflect the ongoing commitment of the U.S. Department of Labor’s Wage and Hour Division to support workers’ families and those who employ them at a time when they need it most.”

The WHD’s new forms include more questions that users can answer by checking a response box and now feature an electronic signature to reduce physical contact and help mitigate the risk of COVID-19 transmission. These revisions were influenced by substantial public input and will hopefully reduce the time users spend providing information, as well as improve communications between leave applicants and administrators.

In general, the FMLA entitles eligible employees of covered employers to take up to a total of 12 workweeks of job-protected, unpaid leave, or to substitute accrued paid leave, during a 12-month period for the following reasons:

• The birth of the employee’s child;
• The placement of a child with the employee for adoption or foster care;
• To care for the newborn or newly-placed child;
• To care for the employee’s spouse, parent, son, or daughter with a serious health condition;
• When the employee is unable to work due to the employee’s own serious health condition; or
• For any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a military member on covered activity duty.

The new Families Care First Coronavirus Response Act (FFCRA), which ensures that workers are not forced to choose between their paychecks and taking appropriate precautions by way of health and safety measures, includes temporary amendments to the FMLA. This expanded family and medical leave entitlement became effective April 1, 2020 and will expire on December 31, 2020.

The Department of Labor (DOL) is also seeking information from the public regarding the regulations implementing the FMLA. This Request for Information (RFI) will enable the DOL to gather information concerning the effectiveness of the current regulations. The current RFI does not include comment on the FMLA protections under the FCRA. Current information about the FCRA can be accessed here. If interested, you can submit comments on the Federal eRulemaking Portal. All comment submissions must include the agency name and Regulatory Information Number (RIN 1235-AA30) for this RFI.

VW Contributor: Skylar Young
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IRS Issues Tax and Reporting Relief for Proposed Fiduciary Standard Consistent with Department of Labor Regulations

By Monte Schatz

There have been a significant series of regulatory announcements and rulings related to the fiduciary duty and its application to employee benefit plans.  The final fiduciary duty rule became effective on June 7, 2016, and has an applicability date of April 10, 2017. The President by Memorandum to the Secretary of Labor directed the Labor Department to examine the impact of the fiduciary duty rule.  On March 2^nd the DOL published 82 FR 12319 seeking public comments about questions raised in the Presidential Memorandum.  The March 2^nd notice also provided that a 60-day delay in implementation would be effective on the date of publication of a final rule

The Principal Transactions Exemptions and the accompanying Best Interest Contract provisions, included as part of the fiduciary duty rule, also have an applicability date of April 10, 2017, with a phased implementation period ending on January 1, 2018. The BIC Exemption effectively states that the fiduciary advisor must sign a “Best Interests Contract” (BIC) with the client, stipulating that the advisor will provide advice that is in the Best Interests of the client.   The Principal Transactions Exemption allows compensation for certain transactions by certain broker-dealers, insurance agents, and others that will act as investment advice fiduciaries that would otherwise violate prohibited transaction rules that trigger excise taxes and civil liability.

Most investment industry groups’ concerns regarding any non-compliance during a “gap period” of the financial fiduciary rule focused on Department of Labor and its potential civil liability enforcement provisions as outlined under ERISA.  Additional concerns were raised concerning Internal Revenue Service enforcement provisions found in Internal Revenue Code §4975 prohibited transaction rules that provides for the imposition of excise taxes for violations of that rule.

As a result of delays of the Fiduciary Standard rules, the Department of Labor published Field Assistance Bulletin (FAB) 2017-01.  FAB 2017-01 provides that, to the extent circumstances surrounding its decision on the proposed delay of the April 10 applicability date give rise to the need for other temporary relief, including retroactive prohibited transaction relief, the DOL will consider taking such additional steps as necessary with respect to the arrangements and transactions covered by the DOL temporary enforcement policy and any subsequent related DOL enforcement guidance.

In Announcement 2017–4 the IRS stated, Because the Code and ERISA contemplate consistency in the enforcement of the prohibited transaction rules by the IRS and the DOL, the Treasury Department and the IRS have determined that it is appropriate to adopt a temporary excise tax non-applicability policy that conforms with the DOL’s temporary enforcement policy described in FAB 2017-01. Accordingly, the IRS will not apply § 4975 and related reporting obligations with respect to any transaction or agreement to which the DOL’s temporary enforcement policy, or other subsequent related enforcement guidance, would apply.

SOURCES:

http://www.asppa.org/News/Article/ArticleID/8480

https://www.irs.gov/pub/irs-drop/a-17-04.pdf

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Department of Labor Delays Implementation of the Fiduciary Rule

Last year, the Department of Labor (“DOL”) issued a final rule, expanding the definition of a fiduciary, making many broker-dealers and insurance agents fiduciaries. This rule, issued April 2016, was set to become effective June 2016, but was then delayed until April 10, 2017, with certain provisions delayed until January of 2018. However, President Trump ordered a review of the new rule and the DOL issued another delay, of 60 days, to complete the review. With the delay, the expanded fiduciary definition will become effective June 9, 2017.

Under the rule, a person or firm that is deemed a fiduciary is required to act in the best interests of their clients. This includes an obligation to avoid conflicts of interests, or otherwise receive compensation that creates a conflict between the interests of the fiduciary and the client. The new rule poses several issues for certain professionals that will be deemed a fiduciary under the new rule. For example, sales commissions would be deemed a conflict of interest, creating an especially problematic situation for broker-dealers that engage in principal transactions with clients. However, the DOL recognized the issue and created several principal transaction exemptions, but the exemptions require additional burdensome steps. This issue, among others, are central to the review causing the rule to be delayed.

Despite this delay, and the DOL admitting the review will not be complete by June 9, 2017, the expanded definition of fiduciary will be implemented at the end of the 60-day delay. Therefore, broker-dealers, insurance agents, and others that will now be deemed a fiduciary, should be prepared for the additional requirements on June 9, 2017.

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The Saga Continues: The DOL Appeals the Court’s Ruling Halting The New Overtime Rules

In the latest chapter in the ongoing saga of the newly revised (and currently halted) overtime rules, on December 1, the Department of Labor appealed the lower court’s ruling to the United States Court of Appeals for the Fifth Circuit.

As we previously reported, last week Judge Amos Mazzant issued a temporary injunction stopping the implementation of the revised overtime rules scheduled to go into effect on December 1.  The appeal by the Department of Labor challenges that ruling.

Judge Mazant’s temporary injunction remains in place for now until the Court of Appeals rules on the appeal.  The Court of Appeals’ ruling will likely not come until 2017.  Of course, no matter what the Court of Appeals decides, one of the parties may appeal that ruling to the Supreme Court further prolonging a final resolution of the issue.

However, President-elect Trump has signaled that he is not in favor of the new rule; therefore, the new administration may have little interest in continuing to pursue the matter after he takes office.

The bottom line is, for now, the temporary injunction halting the implementation of the new overtime regulations continues unless and until the higher court rules otherwise.

We will continue to monitor the situation and keep you updated.

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DOL Revises The Family and Medical Leave Act (FMLA) Poster

by Joshua A. Diveley

The Department of Labor (DOL) revised The Family and Medical Leave Act (FMLA) poster which certain employers must display at employment locations. The revisions were released in late April, 2016. The poster was revised to clarify language and include additional information not contained in the prior February 2013 version of the poster.

All covered employers, generally those with at least 50 employees, are required to display the poster and keep it displayed. The poster summarizes the major provisions of FMLA and informs employees how to file a complaint for non-compliance by an employer. The poster must be displayed in a conspicuous place where employees and applicants for employment can see it. A poster must be displayed at all locations even if there are no eligible employees.

A copy of the revised poster is available at: http://www.dol.gov/whd/regs/compliance/posters/fmlaen.pdf.

The February 2013 version of the FMLA poster is still permitted and can be used to fulfill the posting requirement. Although displaying the revised poster is not mandatory, it is still a good idea for an employer to display the most recent version of the poster. Use of the most current poster shows a good faith effort to make employees aware of the latest information relating to employment laws.

An employer who willfully violates the posting requirement may be assessed a civil fine of $110 for each separate offense.

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SEC Announces Priorities for 2016; Protecting the Retail Investor From Retirement Advisors

The Securities and Exchange Commission (SEC) announced their priorities for 2016 and examining retirement plan advisors remains a focal point. In June of 2015, the SEC, through their Office of Compliance Inspections and Examinations (OCIE), launched the Retirement-Targeted Industry Reviews and Examinations initiative (ReTIRE). Since that time, OCIE has conducted over 160 examinations of retirement advisors and brokers, with over 115 on the advisors. The purpose, generally, is to protect retail investors and their retirement accounts.

With a priority on protecting retail investors, OCIE is examining SEC registered advisors to ensure they are taking adequate steps to follow their fiduciary obligation towards their client’s best interests. This often means the advisor’s fee is scrutinized, with practices such as reverse churning being the target. Reverse churning, in sum, is a practice of advisors putting investors into accounts that pay a fixed fee to the advisor, but usually fail to perform in a manner to justify that fee. For 2016, the review is expanding and will now include the practice, disclosures, and sales strategies for exchange traded funds (ETF). Two other new priorities include examining the sale of variable annuities and undisclosed public pension advisor gifts and entertainment.

The effort by OCIE is not to be confused with the Department of Labor (DOL) examination on retirement advisors, which is running concurrently. The DOL examinations under the Employee Retirement Income Security Act, however, is similarly focused on protecting the retail investor. Comments by those at the SEC and DOL suggest that the focus on protecting the retail investor through these investigations are likely to continue for some time.

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