GOVERNOR BROWN SIGNS BILL SETTING UP RETIREMENT FUND FOR LOW WAGE WORKERS

 

Before anyone panics, let me say up front that employers do not have to fund any of this with their own money, you just have to set this up in your payroll so that a percentage of an employees check goes to a State run retirement programSo now let me tell you what we know:

Gov. Jerry Brown is scheduled to sign legislation Thursday to automatically enroll nearly 7 million people in a retirement savings account, an attempt to address growing fears that many workers will be financially unprepared to retire.

The legislation creates a state-run retirement program for workers who don’t have an employer-sponsored plan, many of them working in lower-wage positions. It requires employers to automatically enroll their workers and deduct money from each paycheck, though workers can opt out or set their own savings rate. The account could also be carried from job to job.  It is suggested that originally 5% would be deducted and it would go up by 1% per year until it settles at 10%.  I do not know many workers, especially low income people that can afford 10% of their income being taken away for this program.

Supporters of the concept hope that requiring workers to affirmatively opt out will make them less likely to do so, but it is up to employers to make sure all employees will be aware of this program and that they can opt-out.  Experience from the health insurance program is that most employees will opt-out if it involves their own money.

This bill is known as SB1234 by Senate President Pro Tem Kevin de Leon, D-Los Angeles.  It will be called SECURE CHOICE.  You may thank him directly if you are so disposed or let him know what you think of his idea at   https://sd24.senate.ca.gov/contact/email

Below are some key points.  This program will not open until the 9 member panel charged with oversight of the program is installed, so this may not start for a year or two.

KEY FEATURES OF THE CALIFORNIA SECURE CHOICE RETIREMENT SAVINGS PROGRAM:

Governing and Oversight Board

The California Secure Choice Retirement Savings Investment Board (https://www.treasurer.ca.gov/scib/) is modeled after ScholarShare, California’s 529 College Savings Plan. The Board is comprised of nine members: the State Treasurer (Chair), State Controller, Director of the Department of Finance, a retirement savings and investment expert appointed by the Senate Rules Committee, an employee representative appointed by the Speaker of the Assembly, a small business representative appointed by the Governor, and three additional public members appointed by the Governor. Page 3 of 4

The Board is charged with the administration of the Secure Choice Program, and to date has overseen the completion of the legal analysis and the mandated market analysis and feasibility study. In moving forward with the full implementation of the program, the Board will be the ongoing administrator for the hiring of private firms to manage the investment portfolio and the individual retirement savings accounts.

Disclosures for Employees and Employer Liability Protections

Employees offered the opportunity to participate in the Secure Choice Program will receive a program information packet with a disclosure form that includes the benefits and risks of making retirement contributions, the mechanics of how to participate in or opt out of the program, the process for the withdrawal of retirement savings, and how to obtain additional information about the program.

The disclosure form will clearly inform employees that employers are not liable for their decisions whether to participate in or opt out of the program, or for employee investment decisions, and state that their employer is not a fiduciary of the California Secure Choice Retirement Savings Trust or program, the employer does not bear responsibility for how the program is administered, and the employer is not liable with regard to investment returns and benefits paid to program participants.

In addition, the disclosure form will notify employees that the program is not an employer-sponsored retirement plan, their employers are not in a position to provide financial advice, and that they should contact financial advisors if they want to seek financial advice.

To notify employees that the state is not liable for the retirement savings benefit, the disclosure form will also specify that the Secure Choice program fund is not guaranteed by the State of California.

Employees that choose to participate in the program will be required to acknowledge that they have received and read all of the disclosures.

Employee Participation in the Secure Choice Program

When the Secure Choice Board officially opens the program for enrollment, only employers that do not offer their own employer-sponsored retirement plan (such as a 401(k), SEP, or SIMPLE plan) or automatic enrollment payroll deduction IRA will have to perform the ministerial duty of supplying the information packet and disclosure form, and allow their employees to remit contributions through payroll deduction.

Employees will be automatically enrolled, and employee participation will be phased-in over a three year timeframe, starting with the largest employers:

 Employers with 100+ employees: allow employee participation within 12 months of the Board opening the program for enrollment;

 Employers with 50+ employees: within 24 months;

 All other eligible employers: within 36 months.

Participation by employees will be completely voluntarily, and employees will retain the ability to opt out at any time.

The default employee contribution rate will be set at 3%, with Board authority to adjust the amount between 2-5%. Through regulation, the Board could also establish an auto-escalation contribution rate, capped at 8% of salary with a limitation on increasing the rate no more than 1% annually. Employees will be able to specify their level of contribution if they do not want to contribute the default rate, and could also opt out of auto-escalation at any time. Page 4 of 4

Employees that already have access to a workplace retirement plan could also voluntarily participate in the Secure Choice Program. However, their employer will not be obligated to allow them to use their payroll system to make automatic payroll contributions to the program.

Role of Employers

Employers that opt to make the Secure Choice Program available to their employees will not bear any fiduciary responsibility and will not be required to pay administrative fees or comply with federal quarterly-reporting mandates. The administrative function of employers will be limited to providing employees with the program information packet and disclosure form, and allowing their employees access to their payroll system to make payroll deductions to the program.

Due to current federal prohibitions, voluntary employer contributions to employees’ individual retirement accounts will only be permitted if there is a future change in federal law and employer contributions would not cause the Secure Choice Program to be treated as an employee benefit plan under ERISA.

WE WILL WRITE MORE ON THIS TOPIC WHEN THERE IS MORE INFORMATION AND WE ARE NEARER TO IMPLEMENTATION.

MORE EFFECTS FROM THE CHANGE TO AGRICULTURAL WORK HOURS

With the coming change, beginning in 2019, to lower the hours worked in agriculture from 10 to 8 per day, there are also other changes to consider.  First, right now, we encourage our employers to give their employees 30 hours of sick pay per year.  As the hours drop after 2019, the hours of sick pay should also drop until they reach 8 hours x 3 days or 24 hours.  So employees will lose 6 hours of sick pay over time.  Again, you cannot make that change now, but understand it will be a change in a few years.

Second and more important, vacation hours will change.  In the past, it was not really correct to say you get “one week” of vacation because that does not define an exact number of hours offered.  So, we changed your employee packets to say 1 week (60 hours).  Now, we need to start changing that again and we need to do it soon.  Many customers also offer 2 weeks of vacation (120 hours) after anywhere from 2-5 years later.  So, an employee hired in 2017 may be seeing his hours reduced by as much as 20 hours in a week by the time they get that 2 week vacation.  For that reason, we are proposing a change to employee vacation policy that states the employee will earn the equivalent of one week of vacation based on the consistent average of the work weeks from the previous year.  In other words, if an employee works around 40 hours a week, they will get a 40 hour vacation.  If they average 45 hours a week, it will be 45 hours of vacation.  It does not have to be an exact average, but based on the common hours worked weekly.  The same will stand for the 2 week vacation.

If you are an HR Mobile Services, Inc. full-service customer, we will be working to change these policies over the next year.  We see the employee packet as a living document and we make changes large and small about 3 times a year for our customers.  If you have an employee handbook from an attorney, it may not be as up-to-date as Federal Law and State laws change constantly.

Don’t Touch That Cellphone!!

Californians!  Because our state government feels it must protect everything you do, the governor has signed AB 1785 written by (and you are going to love the name…) Assemblyman Bill Quirk.  It is known as the “Distracted Driving” update.  Originally passed a few years back, the old law said you should not text while driving and it attached a fine if you are caught.  This makes sense, because we have all driven behind some numbskull who is not paying attention to the traffic and playing with their phone.

So, now we have an update to that law and you should bring this to the attention of every employee you have that uses a company vehicle or drives on company business.  Basically, the new law says that if you touch your phone or other electrical device FOR ANY REASON while driving, it is a violation and subject to a ticket and fine.  Specifically, you can mount a phone or GPS device on the windshield and you are allowed to do a “one-swipe” gesture which allows for the use of GPS but does not allow texting or other items.

These changes were proposed to meet the 2014 appeals court decision to move the emphasis from the action (calling or texting) to the devices.

We are not posting this to cause a discussion on whether a change like this will eliminate accidents, but we feel a technological change would be better.  They  have software that can disable cellphone use while driving, but refuse to implement it.  So, please inform your employees so that they and you are not subject to fines or tickets.

DE MINIMIS IS NOT A MINIMAL PAY ISSUE

If you have any employees who do work before or after clocking out for the day, you should read on.  This is something very big to follow and it could affect almost all employers.

(from CalChamber HR Alerts)

It might not seem like something to worry about: an employee clocks out but then must set the security system and hustle out the door before the system arms itself. But that small period of uncompensated, work-related time (called “de minimis” time in legal parlance) is the source of an important lawsuit before the California Supreme Court.

The California Supreme Court has now agreed to hear the question of when an employer must pay employees for such de minimis time. A decision in this case could have important implications for employers and hopefully will provide much needed guidance in this area. The case before the California Supreme Court involves an employee at a coffee shop who sued the company, claiming that he should have been compensated for the brief time he spent closing up the store after he clocked out. For example, the employee argued that, after he clocked out, he engaged in the following activities that he was not paid for:

  • Exiting the store and locking the door after setting the alarm (he had to exit within a minute).
  • Walking co-workers to their cars (pursuant to store safety guidelines) which took about 45 seconds.
  • Occasionally reopening the store to let a co-worker grab a forgotten personal item.
  • Bringing patio furniture in once every couple of months.

The employee filed a lawsuit under the California Labor Code for unpaid wages and overtime. A federal district court sided with the employer, ruling that the time spent was de minimis and that the employee was not entitled to payment for it.

The employee appealed, to the Ninth Circuit, arguing that the de minimis doctrine does not apply to California wage claims.

The Ninth Circuit asked the California Supreme Court to decide whether the federal Fair Labor Standards Act’s de minimis doctrine applies to claims for unpaid wages in California, noting that California wage and hour laws often provide greater protections to employees than federal laws.

The California Supreme Court has agreed to decide this important question, and California employers will want to stay tuned.

Employers with specific questions regarding compensation for time spent before and after clocking out should consult legal counsel.