New Requirements for Retirement Plans offered at Work

Posted on December 7, 2011 by Walter Haines, Esq.

Does your employer offer a 401k, profit sharing, or a money market account? Were you given specific details about this plan prior to signing up; such as past performance, fees and expenses? Do you get monthly or quarterly statements on your investment?

Until recently none of this was required by law. The US Dept of Labor (DOL) has better defined what is required to be shared with participants and beneficiaries prior to investing and throughout the term of the investment. In general all of these new requirements will go into effect as early as May 31, 2012.

Under the Employee Retirement Income Security Act (ERISA) the following information must be shared with potential employee investors and existing employee investors as well as their beneficiaries.

1.     Initial & Annual Notice
Before the investor begins making contributions and every year after the investor should be notified of the following information.

a. Investment-Related Information
Investment related information can be complex and very detailed so the employer is required to provide the following: performance data, benchmark information, fee and expense information, Internet website address to obtain more specific or current information, and a glossary of terms. As well as a side by side comparison of each of the plans that are offered.

b. Plan-Related Information.

i. General Plan Information
Information regarding the operation of the investment including when and how to invest, if there are any limitation to the times amounts that can be invested, a description of “brokerage windows”, reference to any applicable voting rights and identification of investment managers.
ii. Administrative Expenses Information.
Administrative expenses are expenses that are typically related to cost of managing the fund such as monthly, quarterly or annual record keeping. If multiple accounts exist this information must be provided for each individual account and be specific that account.
iii. Individual Expenses Information
These are expenses that may be charged against a participant's or beneficiary's individual account for services provided on an individual basis (e.g., fees to process loans or qualified domestic relations orders (QDROs), or sales charges).

2.     Updating Notice
Any changes to the plan information previously disclosed must but updated and disclosed within at least 30 days but not more than 90 days prior to the effective date of the change. It’s important to note that updating notices do not apply to investment related information
3.     Quarterly Notice
Quarterly notices occur every 3 months and usually align with the fiscal year. Investor and beneficiaries must receive notice of the dollar amount of the plan related fees and expenses, both administrative and individual and description of services for all fees and expenses. It’s important to note that if notices of the account were made and outside of the regularly scheduled notices then those notices do not need to be reiterated at the regularly scheduled time.
4.     Disclosures Subsequent to Investment.
Not only do potential employee investors and beneficiaries need to be informed of the above mentioned investment-related information and the plan-related information prior to investing but they also need to be informed of the final regulations. Final regulations should provide information such as: voting rights, management rights and how these rights will and can be passed or shared with the beneficiaries.
5.     Information Provided Upon Request
Investors and beneficiaries can are any time request copies of any plan or investment related information including: financial statements, prospectus, reports, non-registered investment alternatives, share value information, dividend disbursement, list of assets comprising the portfolio.

Labor law is complex if you have any questions regarding your employment it is recommended that you contact a California labor law attorney who can help you understand your rights and in many cases will review your situation without charge.

If you have any questions about this article or our blog, feel free to call us at:

Long Beach – (562) 256-1047
Los Angeles – (213) 261-0229
San Francisco – (415) 200-0012 or (415) 230-2755
San Diego – (619) 342-1242 or (619) 272-2193

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SEVERANCE PACKAGES: HERE IS HOW YOU CAN TURN LEMONS INTO LEMONADE

Posted on November 30, 2009 by Walter Haines, Esq.

There is no doubt that receiving a pink slip will leave a sour taste your mouth, but a well-negotiated severance package may be the perfect sweetener. There is no law requiring employers to pay severance benefits, but many do so in order to avoid conflict with exiting employees. At the bare minimum, employers must pay for earned compensation and accrued vacation days. If this is all your employer offers, it is not extending benefits, but rather fulfilling its legal obligation. True severance benefits are perks that the employer is not required to provide such as extended insurance coverage, contribution to retirement funds, favorable references, and outplacement services, among others. Your employer will certainly assemble a package that is in its best interest and you are by no means required to accept and you may make a counteroffer.

The first step to negotiating a favorable severance package is to place yourself on equal footing with your employer. Convey your value to the company. Typically, the longer your length of employment, the better your bargaining power. If you have specialized skills or knowledge, you may take them with you to a competitive organization. Play up your contributions to the company. It is helpful to refer to positive performance reviews, work on special projects, or established relationships with important clients. Also keep in mind your employer’s position. If the company is in dire financial straights and laying off employees or going out of business, it may not be able to offer certain benefits. You may want to ask around and find out what other employees have been offered. 

Strategy:

After evaluating your bargaining position, determine what benefits you will request. In addition to monetary compensation, there are other valuable benefits that may be included in a severance package. Some items to consider are as follows:

  • Insurance Coverage: Health and life insurance coverage typically ends on the day of termination or shortly thereafter. Your employer may extend coverage for a specific period of time or until you purchase coverage from another provider. 401K/Retirement Benefits: Your employer may make a lump sum contribution to your 401K or make periodic contributions while you are receiving severance pay.
  • Sick Leave: Employers are not required to pay for accrued sick days, but may do so as part of a severance agreement.
  • References: A positive reference letter outlining your responsibilities, accomplishments, job longevity, and commitment to the company will be vital to your future job search. It is also wise to obtain the name and phone number of an individual who will serve as a reference. Letters and reference calls are little cost to the employer and will be invaluable to you. 
  • Outplacement Services: Often employers will offer to pay for college courses or career training and allow access to office equipment such as computers, phone, fax, and secretarial staff. 
  •  Form of Payment: Whether your severance pay will be paid as a lump sum or monthly payments may have significant tax implications. For instance, severance payments may not be considered as taxable wages. (http://www.law-job.com/7312.shtml) Check with your tax accountant or CPA to confirm this information before acting.

The aforementioned benefits are open for negotiation, but understand that in order to obtain those benefits that you really want you must be willing to part with others. Imagine your spouse is ill and you are not too concerned about payment for accrued sick days. If you agree to accept little or no payment for sick days, then your employer may be more willing to extend health coverage.

Keep in mind that employers often place conditions on the payment of severance benefits. These conditions may include a waiver of all legal claims against the employer and promises to neither disclose the terms of the severance agreement nor engage in activities that are against the best interests of the employer. Be aware that a release typically only protects the employer and is a legally binding contract; therefore, you should carefully review the terms before signing.

If you are presented with a severance package and release, immediately consult a California labor law attorney. A knowledgeable attorney will be able to advise you of your rights and insure that the terms of the release are fair and equitable. Moreover, a labor law attorney may be able to secure better terms by intervening in negotiations on your behalf.
 

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