Employment Law Updates

REIMBURSEMENTS DONE RIGHT

It is a common business practice for employers to reimburse their employees for certain job-related expenses.  If the reimbursement is made through an “accountable plan,” the reimbursement is not included in the employee’s income.  An accountable plan is a reimbursement or allowance arrangement that meets the following three requirements:  (1) the reimbursed expense has a business connection, (2) the employee is required to adequately account to the employer about the expense, generally by submitting a receipt, and (3) the employee is required to return any excess reimbursement within a reasonable time.  If the accountable plan requirements are not met, the reimbursement is included in the employee’s income and subject to wage withholding and payroll taxes.  For more information on accountable plans, see page 49 of IRS Publication 535.  You can also click here for information on accountable plans.

WATCH THOSE 401(k) FEES

Employers who sponsor 401(k) plans have a fiduciary responsibility, either directly or through their trustees, to determine that the fees incurred in the operation of the plan are reasonable. This should be done when establishing a plan and periodically thereafter.  The Department of Labor has provided a checklist to help you determine the reasonableness of fees.  You can click here for that checklist.  When comparing fees quoted by various vendors, this checklist should be used and then kept in the plan records, as the Department of Labor may request evidence of the process used in agreeing to and monitoring fees.  The Department’s general website relating to retirement plans provides a wealth of information on other topics as well.  You can click here for that website.