By Arris Reddick Murphy, FedEx Corp.
The U.S. Department of Labor’s (DOL’s) much-discussed final rule on overtime pay announced in May focuses primarily on updating the salary and compensation levels needed for executive, administrative, and professional (EAP) workers to be classified as exempt. But it may have implications for some of these workers’ 401(k) retirement plans, as well.
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The rule, which takes effect December 1, 2016, establishes a standard salary level for full-time salaried employees at $913 per week, sets an annual compensation requirement for highly compensated employees who are subject to a minimal duties test at $134,004, and implements a process for updating the salary levels every 3 years to maintain the rule’s new levels and to make sure they continue to provide an effective exemption test.
The rule is intended to provide overtime protection for workers, and it will boost pay for many. Based on salary data, about 4.2 million salaried workers will be affected by the new rule. The DOL estimates employers will make adjustments so that 4.1 million of them will become eligible for overtime, while the remaining 100,000 will likely receive a pay increase so their salaries are above the threshold.
Employers may need to make payroll changes for some employees to comply with the overtime regulation, and many will do so before the rule’s effective date. Beyond that, this article looks at the possible impact of necessary overtime employment changes as they relate to employees’ 401(k) plans.