Small Business

Published on: May 30, 2012

Quick Link: GAO: Half of 401(k) plan execs don’t know what fees they pay

According to this article from Pensions & Investments, half of employers could not accurate indentify the fees charged to participants in their 401(k) plans.

As we’ve discussed in earlier posts, such as this one about 401(k) plans for small businesses, ERISA’s fiduciary provisions are expansive. It is hard to imagine a responsible fiduciary who has satisfied his duties of prudence and loyalty, but cannot identify the fees charged to participants in the 401(k) he administers.

We’ll talk more about fiduciary duties in later posts, but the headline is clear for this post: 401(k) fees are opaque and you aren’t the only one who is confused. The people in charge don’t understand either.

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Published on: May 24, 2012

Quick Link: Illinois Bill to Protect Employees’ Social Media Goes to Governor

By The Erlich Law Office, PLLC

The Chicago Tribune reports that a bill to protect current and prospective employees from requirements to provide their social media passwords to their employers has gone to Governor Quinn.

If this bill is signed into law, Illinois will join Maryland as the only two states with these sorts of protections in place.

Published on: May 24, 2012

New EEOC Guidance: CRIMINAL BACKGROUND CHECKS AND THE EMPLOYER

By The Erlich Law Office, PLLC

Employers regularly use criminal background checks and credit checks to narrow their list of applicants. High unemployment has vastly expanded the applicant pool and employers now have the luxury of selecting only the most qualified candidates. The Equal Employment Opportunity Commission (“EEOC”) had been largely quiet on the legality of these somewhat invasive tests since 1990 but has now issued new guidance.

CAN I STILL DO CRIMINAL BACKGROUND CHECKS ON APPLICANTS?

Yes. The ability to do a background check on a job applicant has not been substantially limited. What has been greatly changed is the employer’s use of information obtained in a background check. Employers have been asked by the EEOC to no longer throw out an application because of a prior arrest or general conviction.

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Published on: May 1, 2012

FMLA Basics Everyone Should Know

By The Erlich Law Office, PLLC

The Family and Medical Leave Act of 1993 (FMLA) is a federal law requiring employers to grant paid leave in certain situations for employees. It was written in order to help American employees take care of their families, loved ones, and themselves in the case of medical necessity. Not all employees are covered and requirements for coverage vary state-by-state.

Are you covered by the FMLA?

The federal FMLA only applies to employers with 50 or more employees within 75 miles of the employee’s jobsite. If you work at a company with less than 50 employees, you generally are not covered. The employee must also have worked for their employer for over a year and worked at least 1,250 hours in the last 12 months. Some states, however, have lessened the threshold for coverage in their state’s version of the FMLA.

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Published on: April 25, 2012

Should Your Small Business Have a 401(k)?

By The Erlich Law Office, PLLC

Should Your Small Business Have a 401(k)?

Small business owners often feel that offering a retirement savings plan legitimizes their business and makes them more competitive in the hiring market. Whether or not these perceptions are true, very few small businesses understand the legal implications of offering a 401(k). Before you decide to offer a retirement plan, you should understand the potential liability and how to avoid it.

First, the bad news. The law that governs employee benefit plans is the Employee Retirement Income Security Act of 1974 (“ERISA”). By offering a 401(k), the named fiduciary, generally the business owner in a small business, takes on a full set of fiduciary responsibilities, including the duties of prudence and loyalty. The fiduciary responsibilities under ERISA are considered “the highest known to the law.” Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir. 1996). The liability associated with being a fiduciary is not limited by your corporate structure. It attaches to the fiduciary in his or her personal capacity. As a result, the decision to operate a 401(k) plan without proper planning and advice can create substantial risk and liability to a business owner. These problems have solutions, including fiduciary insurance, the advice of an experienced attorney, and proper planning.

On to the good news. A 401(k) plan can be a great asset to a business and the requirements of ERISA are not problematic for small businesses that follow the necessary steps to avoid unnecessary risk. One important point to remember is that ERISA’s fiduciary duties are more about process than substance. This can be a problem for businesses that do not know how to properly document their decision-making processes. If you keep minutes of your meetings and record the documents you review while choosing a retirement plan, those records can go a long way toward proving you used a responsible, prudent process to make your decision. Obtaining competitive bids is also considered a fiduciary best practice. It is difficult to prove that your decision making process was prudent if you only consider one offer.

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