Nicole Rice

Labor issues in play – retirement, overtime & unemployment

By Nicole Rice, Policy Director, Government Relations

Capitol Update, Jan. 6, 2017

ALERT: Employers are NOT subject to Secure Choice mandate in 2017

Contrary to what you may have heard, California employers will not be subject to the Secure Choice Retirement Savings Investment Program (Secure Choice) in 2017.  In fact, according to Secure Choice officials, the earliest any employers could be subject to the law is 2019.  Consequently, manufacturers are not obligated to enroll their employees into the program this year and should not feel compelled to make any changes related to their offering of retirement benefits to comply with the law.

The Secure Choice Program was developed by the State Legislature in 2012 and subsequently enacted in legislation (SB 1234, Kevin de Leon) approved by the Governor last year (SB 1234 - Chapter 804, statutes of 2016). It requires all employers with five or more employees who do not offer a qualified retirement savings plan to automatically enroll their workers into this government-administered program or be subject to a penalty.

Generally, bills signed by the Governor in the preceding legislative year become effective on January 1 of the following year. However, based on amendments secured by CMTA and others require the Secure Choice Board to certify to the Governor and Legislature that it has met several “prerequisites” have been met before the program can become operational and enrollment can begin.

For example, because this is not an employer-sponsored retirement plan, the Secure Choice Board must demonstrate that it has clearly defined the role and responsibilities of employers, so not to subject them to ERISA liability. Additionally, it must develop an operational model that limits the amount of direction and interaction employers will be required to provide employees concerning the program. These and other steps must be accomplished before enrollment can begin.

Even after the program opens, it will be phased-in over a three-year period, subject to the following schedule:

  • More than 100 employees – within 12 months after the program is open for enrollment;
  • More than 50 employees – within 24 months after the program is open for enrollment;
  • More than 5 employees – within 36 months after Secure Choice is open for enrollment.

Based on the aforementioned projections from Secure Choice officials, the soonest the mandate could go into effect is 2019 for employers of 100 or more employees; 2020 for employers of 50 or more; and 2021 for all other eligible employers.  

For more information about the program, visit the website HERE.


Battle over the New Federal Overtime Law Continues

This week, a Texas District Court judge rejected the U.S. Department of Labor’s (USDOL) plea to stay all action in the Federal Overtime Regulation lawsuit, until the Fifth Circuit Court of Appeals rules on their injunction appeal.  If granted, the District Court would not have been able to take any action towards making permanent its formerly imposed temporary injunction.

Last month, the Appellant Court granted the USDOL’s motion for an expedited briefing schedule on the appeal of the injunction. The final deadline for documents under that schedule is this January 31st.  For more information, click HERE.


Unemployment Insurance Tax Increases in 2017

California manufacturers will experience another increase in their federal unemployment taxes (FUTA) in January 2017, according to a recent release by the Employment Development Department. EDD states that employers will pay a total of $126 more per employee in January 2017 for wages paid in 2016.

California began borrowing money from the federal government in 2009 to cover unemployment insurance (UI) benefit payments during the Great Recession. Because that federal loan remains unpaid, the tax credit usually enjoyed by California employers has continued to rollback, causing UI taxes to increase since 2011. The revenue generated by the increase is applied to repay the loan, which is projected to be paid in full (absent another deep recession) by the end of 2018. At that time, the credit will reset and manufacturers could see a sizable reduction in their UI tax payments beginning in 2019 for wages paid in 2018.


To view the EDD bulletin, click HERE.


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