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| The information
provided herein is general in nature and designed to serve as a
guide to understanding. These materials are not to be construed as
the rendering of legal or management advice. |
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Inside this Issue:
Pension Reform
The
sweeping Pension Protection Act of 2006 was signed into law
by President Bush on August 17. The Act contains new rules
for automatic enrollment in 401(k) plans, changes in funding
requirements of defined benefit plans, and extension of
contribution limits under the Economic Growth and Tax Relief
Reconciliation Act (EGTRRA), among many other changes.
Automatic Enrollment
One of
the significant aspects of the pension act is new rules to
encourage employers/plan sponsors to adopt automatic
enrollment in order to boost employee participation in
401(k) plans. These automatic enrollment rules are
effective for plan years beginning after Dec. 31, 2007,
except for the ERISA preemption rule, which is effective on
the enactment date. The effective date, however, need not
be a barrier to employers who want to set up an automatic
system sooner. Prior to Dec. 31, 2007, plan sponsors can
establish automatic enrollment in compliance with current
IRS rules.
Here are
some of the more important provisions relating to automatic
enrollment:
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Employer Has
Burden to Prove It Sent Cobra Notice
The 8th
Circuit Court of Appeals has ruled that the Employer/plan
administrator has the burden of proving that a COBRA notice
had gone to a particular individual, in spite of the fact
that the administrator provided detailed evidence of its
overall system for such notification. The
Consolidated Omnibus Budget Reconciliation Act ("COBRA")
requires the administrators of covered group health plans to
notify terminated employees that they have the option of
continuing their benefits after their employment ends.
Failure to notify could result in substantial liability for
the Employer.
Facts
Dakotacare
Administrative Services acted as the plan administrator for
the group health care plan for Big D Oil Co. Kelly Crotty
was an employee of Big D Oil until 1993, when the store at
which she was employed was closed. Because that incident
was a “qualifying event” for purposes of COBRA, Crotty was
entitled to notice of her rights with respect to continuing
her health care coverage.
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Iowa Direct Deposit Law
Changes Again
In 2005, the Iowa Legislature
made some important changes to state law regarding direct deposit of paychecks
and what information employers must furnish employees on their payday
statements. Then in 2006, the Legislature revisited these changes and made some
revisions to the new law which employers need to be aware of:
Direct Deposit
Fine-tuned
The 2005 changes permitted Iowa
employers for the first time to require new hires to sign up for direct deposit
of their paychecks as a condition of their hire. However, the new law stated
that “current employees” could not be required to participate in direct deposit
which created the anomaly that once a new hire becomes a current employee, they
could opt out of the direct deposit mandate.
So
during the 2006 session chapter 91A of the Iowa Code was amended to make it
clearer who is covered by the direct deposit requirement. Chapter 91A.3 (3) now
states
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Approaching Deadlines for Human
Resource/Payroll Professionals
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Latest Department of Labor Numbers
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