The U.S. Department of Labor's new overtime rule raises salary thresholds for exempt EAP employees.
Let's discuss the implications of the U.S. Department of Labor's (DOL) new overtime rule, which increases salary thresholds for executive, administrative, and professional (EAP) employees to qualify as exempt from overtime pay. Key changes include:
- Salary Threshold Increase: As of July 1, 2024: $844 per week for EAP employees and $132,964 annually for highly compensated employees (HCEs). As of January 1, 2025: $1,128 per week for EAP employees and $151,164 annually for HCEs.
- Impact on Retirement Plans: Employers must review how their retirement plans define "compensation," especially if overtime pay is included, as more employees qualifying for overtime may increase retirement plan contributions. This change could also affect the determination of highly compensated employees for nondiscrimination testing purposes.
- Impact on Other Benefits: Employers need to assess whether eligibility for health benefits or other fringe benefits is based on exempt status. More employees becoming nonexempt could lead to increased eligibility for these benefits.
- Employers should examine existing compensation and worker classification practices.
- They should also review their retirement and health plan documents to understand the indirect impacts.
- Employers may want to prepare for these changes but wait for legal challenges to resolve before implementing concrete adjustments.
It's important to emphasize the importance of consulting legal counsel for specific advice and acknowledges that the rule is expected to face legal challenges.
