DOL’s Overtime Rules Impact on Employee Benefits

A recent U.S. Department of Labor (DOL) final rule increases the salary thresholds used to determine whether executive, administrative and professional (EAP) employees are exempt from overtime pay under federal law. While the increased thresholds are likely to result in a significant number of previously exempt employees now qualifying for overtime pay, employers must also consider how the increased thresholds may indirectly affect their benefits offerings. Employers may need to reevaluate the following in light of the final rule:

• How their retirement plan defines “compensation”: If an employer’s retirement plan includes overtime pay in its definition of “compensation,” more employees being eligible for overtime could result in increased retirement plan contributions. In addition, the increase could affect the determination of who is highly compensated for nondiscrimination testing purposes.
• Whether eligibility for other benefits depends on exempt status: If eligibility for health benefits or other fringe benefits depends on an employee’s exempt status, more workers being classified as nonexempt could result in more employees being eligible to receive these benefits.

Important Dates

July 1, 2024
The salary level for EAP employees will increase to $844 per week and $132,964 per year for highly compensated employees (HCEs).
Jan. 1, 2025
The salary level for EAP employees will increase to $1,128 per week and $151,164 per year for HCEs.

Action Steps
In addition to evaluating existing compensation and worker classification practices to comply with the final rule, employers should carefully examine their retirement and health plan documents to determine how the rule may indirectly impact their benefits offerings. Employers should continue to monitor the implementation of the rule and any potential legal challenges.