Human Resource Consulting From The Business Viewpoint

Human Resource Update | 2023 - 3rd Quarter

This past Tuesday, September 26th, was HR Professional’s Day. It also marked the one-year anniversary of Michael being gone. I found a fun way to honor him and attended “HR Pros on The Plaza” in New York City. In honor of #SHRMDay we gathered at The Today Show to celebrate HR professionals around the world. Not only was I on TV twice but I got to meet Al Roker. Fun memories were made and it helped turn an otherwise painful day into one where I knew he would be proud of me. Especially the part where I had to leave my house at 3:30am to pull this off.

It’s no coincidence that a man like Michael who loved his business, employees and clients as much as he did passed away on the day we celebrate the invaluable work of HR professionals. Being the president of my local SHRM chapter is an honor and I am grateful to be a part of such an impactful organization. I had a great time paying tribute to our profession and honoring the man that made it all possible for me. Thank you to all of you for what you do for the HR profession. Cheers to Mike and to HR professionals around the world!



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Proposed Regulations on Using Forfeitures in Retirement Plans

The IRS and Treasury published proposed regulations on February 24, 2023 that create separate rules, for both defined contribution and defined benefit plans, for using amounts forfeited back to retirement plans. The proposed regulations are to apply for plan years beginning on or after January 1, 2024, but plan administrators can rely on them starting immediately.

Use and Timing of Forfeitures in Defined Contributions Plans (DCP)

The proposed regulations clarify that forfeitures arising in any DCP (including money purchase pension plans) may be used for one or more of the following purposes:

  •  to pay plan administrative expenses, 
  •  to reduce employer contributions under the plan, or
  • this includes the restoration of inadvertent benefit overpayments and the restoration of conditionally forfeited participant accounts that might otherwise require additional employer contributions,
  • to increase benefits in other participants’ accounts in accordance with plan terms.

The proposed regulations require that plan administrators use forfeitures no later than 12 months after the close of the plan year in which the forfeitures are incurred. This deadline is intended to alleviate administrative burdens that may arise in using or allocating forfeitures when forfeitures are incurred late in a plan year. Although nothing in the proposed regulations would preclude a plan document from specifying only one use for forfeitures, the plan may fail operationally if forfeitures in a given year exceed the amount that may be used for that one purpose. 

A transition rule is provided in the proposed regulations. Forfeitures incurred during any plan year that begins before January 1, 2024, are treated as having been incurred in the first plan year that begins on or after January 1, 2024. The IRS likely included this transition rule knowing that many plans have accumulated large amounts in their forfeiture suspense account and may need time to address how to use those amounts.

Use and Timing of Forfeitures in Defined Benefit Plans

The rules relating to the use of forfeitures in Defined Benefit Plans are updated in the proposed regulations to provide new minimum funding requirements. Currently, under reg. section 1.401-7(a), forfeitures under pension plans need to be used as soon as possible to reduce employer contributions. The minimum funding requirements of sections 412, 430, 431, and 433 do not allow the use of forfeitures to reduce required employer contributions to a defined benefit plan in the manner contemplated by existing reg. section 1.401-7. Rather, reasonable actuarial assumptions are used to determine the effect of expected forfeitures on the present value of plan liabilities under the plan’s funding method. Differences between actual forfeitures and expected forfeitures will increase or decrease the plan’s minimum funding requirement for future years pursuant to the plan’s funding method. The proposed regulations would update reg. section 1.407-1(a) to become consistent with the new minimum funding requirements. 

Employers should be aware of their forfeiture suspense account balances and develop a plan for using such amounts. Plans with significant forfeiture balances need to ensure timely and appropriate allocation of these funds to avoid an operational failure. Click here to see the proposed regulations and please reach out to MFYCO if we can be of any assistance in this matter.

Could You Be Sued Over Retirement Plan Fees? What to know

 A legal opinion of ERISA threatens to ignite class action challenges to retirement plan fees

If you are a plan sponsor, plan administrator or plan service provider and haven't yet heard of the Ninth Circuit's recent opinion in Bugielski v. AT&T Servs., Inc., No. 21-56196 (9th Cir. Aug. 4, 2023), consider this your wake-up call. The Ninth Circuit panel's reinterpretation of ERISA's prohibited transaction rules threatens to pour gasoline on the fire of speculative ERISA class actions challenging retirement plan fees.

The long and short of Bugielski is that the court found negotiation of a standard recordkeeping contract would be a prohibited transaction, unless the plan fiduciary could prove the arrangement met one of the applicable exemptions to those rules.

Under that interpretation, a plaintiff could sue a plan fiduciary based on an alleged prohibited transaction, asserting only that the plan entered into a contract (any contract) with a party that had some prior affiliation with the plan — and nothing more. This would allow plaintiffs to bring suits targeting standard retirement plan fees without providing any of the details they would need to meet the pleading standards for imprudent fee claims established by the Supreme Court in Hughes v. Nw. Univ., 142 S. Ct. 737 (2022).

As everyone — including the Bugielski panel — is aware, a plan's engagement of a third-party service provider such as a recordkeeper or investment manager is commonplace and even necessary. Indeed, a recent study of plan sponsors showed that 94% of ERISA plans retain third-party advisers or consultants. Consequently, nearly every benefit plan will be impacted by the Bugielski opinion if it is left untouched.

Bugielski's impact is so great because of two significant flaws in the Ninth Circuit's reading of ERISA. First, they read the prohibited transaction rules in a way that produces a circular result, and would presumptively prohibit a plan from paying fees for services to an entity that performs services for a fee. Second, they compound the impact of that circular reading by adhering to a more widespread interpretation of ERISA that puts the burden to prove an exemption from the prohibited transaction rules on the defendants. In essence, Bugielski produces the result that every contract for plan-related services is prohibited unless shown otherwise.

The second problem with the Bugielski opinion results from a failure to account for language in the statute that indicates the prohibited transaction rules only come into play when it has been established that no exemption applies. That is, courts should start with a presumption that a contract is lawful, unless a plaintiff shows otherwise. This interpretation better aligns with the full text of the statute.

The litigation impacts of this interpretation of ERISA are that plaintiffs looking to challenge retirement plan fees will face an extremely low pleading burden, and would not have to allege anything more than a transaction (even one that helps the plan) occurred between the plan and a party that had some prior relationship with the plan. As plan fiduciaries are acutely aware, courts have spent the last several years articulating the level of detail a plaintiff must plead to bring a claim of breach of the duty of prudence for excessive fees. Those courts require significantly more than the allegation that a transaction occurred. It is plaintiffs' burden to show some plausible basis to believe not just that fees were paid, but that the fees were actually excessive.

Adopting a reading of Section 406(a) that construes Section 408 not as an affirmative defense but as an essential element of the claim fixes the circular reading of Section 406(a) that would render routine service provider agreements presumptively unlawful. It also aligns with the panel's suggestion that "Congress has already set the balance" as to pleading on prohibited transaction claims, as it involves interpretation of the existing statutory language, not modification of it.

In interpreting a statute, as the panel did here, it is imperative that the words of the statute be read in context. The Bugielski panel, however, failed to consider how the language of Section 406 fits within the broader context of ERISA's remedial scheme. It makes little sense, in that context, to allow routine service provider contracts to be challenged as prohibited transactions, where the same allegations would be found insufficient to establish a claim of breach of the duty of prudence. But that is what this decision does. The panel's decision must be revisited to avoid crippling plan sponsors' and plan administrators' ability to operate plans in an orderly and efficient manner.

Aside from the sprawling exposure and accompanying legal and insurance costs arising directly from this case, the panel's ruling will subject fiduciaries to potential liability — or at least defense costs — even where they have clear evidence of providing well-managed, prudently priced plans, aided by expert third-party service providers, providing best-in-class services to aid participants in planning for retirement. This simply cannot be what the Supreme Court envisioned when it emphasized the importance of lower courts "giv[ing] due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise." Hughes, 142 S. Ct. at 742. We hope that reason prevails, and await the Ninth Circuit's ruling on the motion for rehearing.

Ada W. Dolph                                                    Thomas Horan

Partner, Seyfarth Shaw LLP                                  Associate, Seyfarth Shaw LLP

Taken From Employee Benefit News [email protected] September 25, 2023

New PTO Policies Signal the Future of Employee Benefits

For years now, AI-based tech systems have been training people to expect hyper-personal experiences wherever they go. Shopping online, watching TV and even grocery shopping have been transformed by personalization. 

But the workplace has lagged behind the personalization curve. Employee benefits in particular have traditionally followed a static, one-size-fits-all model. Now, in a tight economy, employers are reexamining benefits with the help of their advisers and discovering two exciting things:

  • Employees want benefits that adapt to their needs and priorities; and
  • the tools now exist to easily make this a reality in a way that actually cuts costs.

The future of employee benefits is personalization and flexibility, and reexamining how companies approach paid time off (PTO) is a critical piece of the puzzle.

Employee wellness gained steam in the 90s and was taken to the next level in the mid-2000s. Think about the ping pong tables, relaxation rooms and catered lunches of Silicon Valley's golden era. Or the classic "health fair" with healthy snacks and maybe a massage chair.

These perks were flashy, but mostly about surface-level physical health. Today, HR teams are going deeper and emphasizing everything that goes into making a person happy and healthy. Backing this up is Monster's 2023 Work Watch Report, which found that 51% of employees say that well-being and related benefits are more important to them than a salary increase.

"Personalization" and "flexibility" have become common buzzwords, but what do they really mean? Ultimately, it's all about adapting to employees on their own terms. The workforce of 2023 and beyond is highly multigenerational. Millennials, Gen Z, boomers, etc., all have different needs, life circumstances and priorities. 

An example: even pre-pandemic, employee surveys showed that given a choice between more money and more vacation days, different employees make different choices. A study from 2020 showed that 20% of employees would choose more PTO. But what about the other 80% who would prefer more money over more PTO? What if some people want both time and money, and are willing to take less of each?

Employers need to solve this for everyone. And the only way to do that is to bake flexibility into the benefits being offered.

PTO is a perfect example of how benefit advisers and the HR teams they serve can earn a huge win by transforming a traditionally static benefit into something personal and flexible. Taking time off is proven to help prevent burnout and improve productivity, but major barriers to doing so persist: financial stress, workplace pressures and guilt top the list. All of these have only gotten worse in the past few years.

In this context, companies are focusing on rethinking their PTO policies as a way to help improve employee well-being, while also solving some major business challenges.

Many organizations are abandoning unlimited PTO and advising others to do the same. As it turns out, this brings major compliance issues and management headaches with little benefit. In fact, only 21% of employees believe unlimited PTO has a positive impact on their team.

The focus now is on giving employees flexibility and ownership — the power to use their time off when they need, for what they need. Time off looks different for different people, and companies need to support that.

Some teams are experimenting with company-wide vacations and PTO minimums. Others are actually paying employees to go on vacations. And some are simply increasing accruals, to give employees more PTO days.

Others are implementing PTO conversion programs that give employees the option to convert some unused PTO into cash, retirement savings, student loan payments and more. PTO conversion is a great example of transforming something static to be flexible and personal can be a real win. Employees love it for the flexibility and peace of mind it gives them; businesses love it for the compliance and liability benefits.

Through the rest of 2023 and beyond, we'll see companies putting into practice the lessons they learned over the course of the pandemic. Chief among these is the importance of personalization when it comes to employee wellness.

As companies navigate today's increasingly tight economy, the costs of employee turnover are higher than ever. In this light, benefits are getting a new look in the context of employee retention — and what employees tell us is that they want flexibility and personalization. 


Source: Employee Benefit News, July 5, 2023, Ulises I. Orozco, Co-Founder , PTO Genius

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EAP Survey Reveals 38% of Workers Are in the Dark


TELUS survey has revealed that two-in-five workers in the U.S. are unfamiliar with the purpose of an Employee Assistance Program (EAP)—also known as an Employee and Family Assistance Program (EFAP) and what it offers. The Index also found that despite no cost to workers, 24 percent of those surveyed cite cost as a major barrier in using EAPs. Workers who reported being familiar with an EAP and what it offers had a higher mental health score than those who did not.

“Employee Assistance Programs provide a wealth of mental health resources and support for employees and their families, but the fact that 38 percent of workers don't understand the purpose of these programs creates a significant gap in utilization,” said Juggy Sihota, Chief Growth Officer, TELUS Health. “While EAPs have existed for a long time, we also cannot assume employees understand how to access or use them. Companies can demonstrate stronger support for their employees' wellbeing by offering a steady stream of education and information about EAPs to address this gap, to help drive utilization and to increase productivity.”

Lack of awareness

Underutilization of EAPs is directly linked to lack of awareness among employees:

  • One third (33 percent) of workers are familiar with EAPs, while 29 percent have heard of them, but don’t know what they offer.
  • Workers who know what an EAP is and what it offers have a mental health score four points higher (73.7) than workers who are not familiar with EAPs (69.7).
  • Among workers who would not use or are uncertain if they would use an EAP, 34 percent do not know what it covers, 21 percent are concerned about confidentiality, and 20 percent do not know how to access the service.
  • Workers who said they were concerned about cost have a mental health score of 62.9.

There is a significant disparity between workers’ perceptions of their access to benefits and the reality of the situation. Despite 62 percent of workers stating that they do not have access to an EAP, a survey conducted in 2023 by the International Foundation of Employee Benefits Plans revealed that 81 percent of US employers were offering an EAP.


Perceived affordability is also a barrier impacting workers’ access to support:

  • The mental health scores of workers reporting affordability as a barrier to accessing mental health support is 24 points lower than workers reporting no barriers and 13 points below the national average.
  • Workers under 40 are two times more likely than workers over 50 to have reported affordability as a barrier to accessing mental health support.
  • Workers earning under $100,000 per year are 70 percent more likely to not use an EAP due to cost concerns than those earning over $100,000 per year.

Source: VitalLaw News,, HR Tracker, 09/28/2023


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Warning: It starts off at a leisurely pace but quickly builds up to high intensity.

New York State Bans Mandatory Captive Audience Meetings (Sept. 12, 2023)

NY State’s Governor Hochul, on September 6, signed into law (A6604 / S4982) a bill banning businesses from requiring employees to attend meetings or listen to communications where the "primary purpose" of such meetings or communications is for management to voice its views on certain religious or political matters, including joining a labor organization ("captive audience meetings"). This law goes into effect immediately.

This law modifies New York Labor Law §201-d and prohibits New York State employers from disciplining workers for refusing to attend captive audience meetings. Employers are also now required to post a notice to employees to inform them of their rights pursuant to this law. However, the law goes on to say that non-mandatory "casual conversations" between employees and employer representatives are not prohibited.

New York Labor Law §201-d(7) outlines penalties for violating the new law: 1) the Attorney General can apply to enjoin or restrain an employer from committing further violations and a court may impose a civil penalty on the employer of $300 for the first violation and $500 for each subsequent violation; and 2) aggrieved individuals can bring claims against an employer for equitable relief and damages.

The law's crackdown on employers' ability to hold mandatory captive audience meetings is consistent with NLRB General Counsel Memorandum 22-04, wherein GC Abruzzo argues that captive audience meetings are unlawfully coercive under the National Labor Relations Act. (See our discussion here.)

The law is similar to the Connecticut law banning captive audience meetings, which has been challenged by the U.S. Chamber of Commerce as unconstitutional and preempted by the NLRA. See Chamber of Commerce v. Bartolomeo, No. 22-cv-01373 (D. Conn.).

The New York law may very well face similar legal challenge. The New York law defines "political matters" to include "the decision to join or support" labor organizations. By restricting the employers' ability to voice its views on joining a labor organization, the New York law is likely preempted by Section 8(c) of the NLRA, which allows an employer to express "any views, argument, or opinion" as long as such expression does not include threat of reprisal or force or promise of benefit. Further, the New York law, aimed at "protecting employee freedom of speech," likely will be challenged on grounds that it unlawfully violates businesses' First Amendment rights of free speech.

We also note that this law is broader than the reach of the NLRB and the NLRB General Counsel's efforts, as it includes employers not covered by the NLRA, such as public-sector employers.

Stay tuned as we continue to monitor this law.

Calculating FMLA Leave During Holidays: An Analysis of DOL's
FMLA2023-2-A Opinion Letter


The Wage and Hour Division of the U.S. Department of Labor ("DOL") recently published an Opinion Letter titled "Whether Holidays Count Against an Employee's FMLA Leave Entitlement and Determination of the Amount of Leave Taken." The letter clarifies the application of leave under the Family and Medical Leave Act (FMLA) when a holiday falls within the workweek.

The crux of the letter is the question of whether an employee taking FMLA leave during a week inclusive of a holiday should have leave calculated as: (A) a fraction of their standard workweek; or (B) a fraction of a decreased workweek (i.e., their regular workweek minus one day). The DOL advises that the computation should be based on a fraction of the employee's usual, full workweek.

When Leave Is Taken for a Full Workweek

Eligible employees of covered employers are entitled to 12 weeks of unpaid leave for specific family and medical purposes under the FMLA. The letter emphasizes that if a holiday falls within a week in which the employee is taking an entire workweek of FMLA leave, the regulations mandate that the whole week be counted as FMLA leave.

When Leave Is Taken on an Intermittent or Reduced Schedule

Employees may utilize FMLA leave intermittently or on a reduced leave schedule, reducing their hours in the day or week. The letter confirms the DOL's consistent position that a holiday is not counted as FMLA leave when less than a full workweek of leave is taken, unless the employee was slated to work on the holiday and used FMLA leave for that day.

The letter also refers to a 2008 Notice of Proposed Rulemaking that declared the use of intermittent or reduced schedule leave "shall not result in a reduction in the total amount of leave to which the employee is entitled…. beyond the amount of leave actually taken." Therefore, subtracting the holiday from the workweek when calculating FMLA leave for a partial week would wrongly diminish the employee's leave entitlement.

The DOL concludes that the FMLA leave entitlement should be grounded in the employee's standard workweek. If the employee is not scheduled or expected to work on the holiday, the fraction of the workweek of leave used is determined by dividing the amount of FMLA leave taken (excluding the holiday) by the entire workweek (including the holiday).

This Opinion Letter provides a critical framework for both employers and employees, ensuring that the implementation of FMLA leave, especially in weeks containing a holiday, adheres to federal guidelines. It underscores the necessity to base calculations on the employee's full, normal workweek rather than reducing it due to holidays, which preserves the true entitlement of the leave.

Navigating the complexities of labor laws such as the Family and Medical Leave Act (FMLA) can be a challenging task, especially with the recent Opinion Letter regarding holidays and leave entitlements.

Source: VitalLaw News,, HR Ideas and Trends Newsletter, 09/13/2023

Quick Benefit Facts for 2023 Limits on Benefits and Compensation
All limits are based on the calendar year.
*Life Annuity at age 65
** Individuals with earned income over $200,000 pay an additional 0.9% in Medicare taxes
  • Michael F. Yates & Company, Inc. can help you with a variety of services ranging from retirement plans to providing results-oriented survey instruments, training and development programs for your employees. Our products and services are intended to help you maximize the effectiveness of your Human Resources function.
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