Close Close

Regulation and Compliance > Federal Regulation

New DOL Rules Could Change Plan Classes

Your article was successfully shared with the contacts you provided.

New DOL Rules Could Change Plan Classes


The federal Fair Labor Standards Act requires employers to pay non-exempt employees overtime for hours worked in excess of 40 in a work week.

New regulations from the U.S. Department of Labor that took effect Aug. 23, 2004, change the rules your employer clients must use when determining which employees are exempt from the overtime requirements because the employees are salaried “white collar,” executive, professional or administrative workers.

You need to know about the new rules because they could affect the benefits market as well as overtime costs.

Supporters and critics of the new DOL rules have focused on how they will change the number of employees eligible for overtime pay. The DOL estimates the new regulations will shift 1.3 million employees into the “non-exempt” category, meaning that those employees would qualify for overtime payment. However, the nations largest labor union group, the AFL-CIO, predicts that as many as 6 million workers will become exempt from FLSA overtime protection.

Meanwhile, a large number of employee benefits plans offer different types of coverage to different classes of employees. In some cases, the plans distinguish between different classes by describing the classes as consisting of “exempt,” “non-exempt,” “salaried” or “hourly” employees. Employers need to be aware of whether the new DOL regulations will affect the employee classes in their benefit plans.

It is impossible to predict how these new rules will affect all employers. That is why it is important for insurance advisors to take a close look at their clients employee benefits plans to identify whether the number of employees who are eligible for coverage or are entitled to a particular type or amount of benefit might increase or decrease because of the changes.

By alerting clients of the need to look beyond the overtime issue and consider how the new regulations could affect employee benefits plans, insurance advisors might be able to help companies limit their exposure to lawsuits, control their insurance costs and address employee-retention issues that arise because of changes to benefits.

All employers, big or small, want to avoid being sued. The new DOL regulations will likely result in a flurry of FLSA-related lawsuits as courts are called on to interpret the rules. It will be important for insurance advisors to help companies learn how they can adjust their employee benefits plans to minimize their risk of a lawsuit.

Another key factor for employers will be the effect of the new regulations on their cost of insurance. Employee benefits plans that offer different types or levels of coverage for different classes of workers typically provide richer coverage for exempt employees. In cases where a number of higher risk employees become eligible for coverage, employers could see their premiums rise. Insurance advisors can help their clients understand the impact on their benefits plans and work with them to keep costs to a minimum.

A more intangible potential side effect of changes to employees benefits is employee retention. If a number of employees who had been eligible previously for coverage suddenly become ineligible, they may leave for jobs that offer benefits. If that happens, the employer might have to acquire and train several employees in a short period of time. Insurance advisors can take this opportunity to help their clients avoid the expense and headaches of hiring and training by providing benefits solutions to help them retain experienced, productive employees.

The issue of how to determine which employees are exempt from the overtime requirement is a politically charged one. It is still unclear exactly how the new DOL guidelines will be applied. That uncertainty makes it imperative that insurance advisors stay up-to-date on changes to how employees are classified and work with their clients to find the best solutions for their changing insurance needs.

is an assistant counsel in the employee benefits law department at Standard Insurance Company, Portland, Ore. He can be reached at [email protected].

Reproduced from National Underwriter Edition, January 6, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.