During the past year, most of the advisory industry and its observers have been focused on the Department of Labor’s new rules for retirement advisors, which take effect this April. But most folks have overlooked another new DOL rule due to take effect on December 1 (yes, that’s this year).
That rule will also have a major impact on the independent advisory industry: The new DOL White Collar Exemption Rules Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees under the Fair Labor Standards Act.
In short, that mouthful of a rule redefines the salary and compensation levels under which employers have to pay overtime to their employees. And it will potentially affect most advisory firms that employ anyone. As a business consultant to the industry, we rely upon many partnerships to implement our recommendations. One of the relationships I’ve used over the years is with New Jersey-based MarketCounsel, and the Hamburger Law Firm. Not only do they handle the complicated compliance aspects of owning an RIA, but they also provide knowledge and perspectives about the advisory industry as a whole.
To find out more about the DOL’s new overtime rules and its exemptions, I talked with Marc Cohen, managing director at MarketCounsel, recently in a phone conversation.
What follows are the top eight questions I believe owners of independent advisory businesses should ask about the new rules and Marc’s answers about the practicality of complying with them [and with my comments in brackets]:
1) What are the new thresholds for paying overtime to employees?
“The old standard required overtime compensation for employees who made less than $455 per week or $23,600 annually, who worked more than 40 hours a week to get overtime. The new standard raised that compensation threshold to $47,476 annually or $913 per week.”
[Basically this means if you have an employee who is getting paid less than $47,476 on December 1, you need to start tracking time and pay them overtime.]
2) Are there any small businesses exempt from the new rules?
“Yes. As we understand it, any firm producing under $500,000 in gross annual revenues is exempt.”
[In other words, if your gross revenue is under this amount you do not have to follow the rules. You can choose not to pay overtime under some or all circumstances.]
3) How are you recommending advisory firms handle this new ruling if they are not exempt?
“Many advisory firms will find value in working with a Professional Employer Organization (PEO) to support them with the various administrative and compliance issues that may arise with managing their employees, including these new regulations. It’s another area that is typically not within an advisor’s core competencies that they can outsource to an expert. A PEO will help them handle and maneuver through these issues and ensure that they are compliant.”