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  • July 2020

The Vita Blog July 2020

  1. San Francisco Enacts “Right to Rehire” Ordinance

    System Administrator – Fri, 31 Jul 2020 05:30:32 GMT – 0

    Overview

    As of July 3, 2020, San Francisco employers with 100 or more employees must offer a “right of reemployment” to certain employees who were or are laid off because of COVID-19. Employees with a right to rehire must be offered employment before any offers are made to new applicants. The ordinance will remain in effect for 60 days unless extended.

     

    Why?

    Nearly 39,000 employees in San Francisco have been affected by the pandemic, according to WARN Act notices filed with state and local officials. There have been 352 WARN notices filed with the city since February. By contrast, during the same period last year, only 13 WARN notices were filed, affecting around 700 workers.

     

    Covered Employers

    Employers with 100 or more employees are subject.

    The ordinance covers employers that own or operate a business in the City and County of San Francisco and employ, or have employed, 100 or more employees on or after February 25, 2020. It applies to both for-profit and non-profit employers. Federal, state, local or other public agencies, and employers that provide healthcare qualifying services are excluded.

     

    Covered Lay-offs

    Applies to lay-offs of ten or more employees within a 30-day period.

    A covered lay-off is a separation from employment of 10 or more covered employees within any 30-day period commencing on or after February 25, 2020. Lay-offs must be caused by an employer’s lack of funds or work for employees resulting from the COVID-19 pandemic. It includes lay-offs caused by operational shutdowns due to the State and County Shelter-In-Place Orders. It applies when employers are seeking to hire workers for the same or substantially similar positions previously held by other workers who were recently laid off.

     

    Eligible Workers

    Employees must have been employed in SF for at least 90 days.

    Eligible Workers are those who were employed for at least 90 days in the calendar year preceding a covered lay-off. If Eligible Workers were separated from their employment due to a covered lay-off, they are protected by the ordinance. While not explicitly articulated in the ordinance, it is presumed that covered employees are those who work and/or reside in San Francisco (city or county).

     

    Worker Notice Requirements

    Notice must be provided by August 2nd for any prior lay-offs and concurrently with or prior to any future lay-off.

    For future lay-offs, Eligible Workers must receive a written notice of their covered lay-off in a language they can understand, at the time of or before the lay-off occurs. For prior lay-offs within the ordinance window, Eligible Workers must receive their written notice by August 2, 2020. In each case, the notice must include:

    • Date of lay-off notice and lay-off effective date
    • Summary of the right to reemployment under the ordinance, and
    • The telephone number for the San Francisco Office of Economic and Workforce Development (OEWD) worker information hotline

    Employers must also notify the OEWD, in writing, of all covered lay-offs within 30 days of the date the lay-off is initiated, with some exceptions. This notice must include:

    • Total number of employees located in San Francisco impacted by the lay-off
    • Job classification at the time of separation for each covered employee
    • Original hire date for each covered employee, and
    • Date of employment separation for each covered employee

     

    Employer Notice to OEWD

    Employers must provide notice of lay-offs and offers of reemployment to the OEWD.

    Employers must provide written notice of a lay-off to the OEWD within 30 days of the date it initiates the lay-off. If an employer does not anticipate or foresee that there will be a lay-off, it must provide written notice within seven days of the lay-off date of the 10th affected Eligible Worker in 30 days. Employers must provide the following information to the OEWD:

    • Total number of employees located in San Francisco affected by the Lay-off
    • Job classifications for each affected Eligible Worker
    • Original hire date for each affected Eligible Worker; and
    • Date of separation for each affected Eligible Worker

    Employers must also notify the OWED in writing of all offers of reemployment, including all acceptances and rejections.

     

    Exceptions to Reemployment

    Employers may withhold offers of reemployment for three reasons: misconduct, severance agreement, and those already rehired.

    Covered employers are not required to offer reemployment under the following circumstances:

    • Misconduct: If, based on information learned subsequent to the lay-off, the employer learns that the employee engaged in acts of dishonesty, violation of law, violation of policy or employer rules, or other misconduct during their employment.
    • Severance agreement: If the company terminated the covered employee between February 25, 2020, and July 3, 2020, as part of a covered lay-off, and the company and covered employee executed a severance agreement as a result of the covered employee’s termination due to the lay-off, pursuant to which, in exchange for adequate consideration, the employee agreed to a general release of claims.
    • Rehiring: If the company terminated the Eligible Worker between February 25, 2020, and July 3, 2020, as part of a lay-off, and prior to July 3, 2020, the company hired a person into the employee’s former position or substantially similar position.

    This Ordinance does not apply to Eligible Workers covered by a bona fide collective bargaining agreement to the extent that the requirements of this Ordinance are expressly waived in the collective bargaining agreement in clear and unambiguous terms.

     

    Offers of Reemployment

    Same position or substantially similar positions must be offered in order of seniority.

    Employers seeking to fill the same, or substantially similar, positions previously held by Eligible Workers must hire in accordance with the following rules:

    Same Position
    Employers seeking to hire for positions formerly held by an Eligible Worker must first offer the position back to the Eligible Worker before offering the position to others.

    Substantially Similar Position
    Employers seeking to hire for any positions that are “substantially similar” to worker’s former position must first offer that position to the Eligible Worker before offering the position to others. “Substantially similar” position is defined as:

    • A position with comparable job duties, pay, benefits, and working conditions to the Eligible Worker’s former position;
    • Any position the Eligible Worker held in the 12 months before the lay-off; or
    • Any position for which the Eligible Worker would be qualified, including a position that may require training, if the Employer would otherwise make the training available to a new employee upon hire.

    Order of Seniority
    If there is more than one Eligible Worker with the same classification, employers must make offers of reemployment based on seniority, which is determined by the Eligible Workers’ earliest date of hire.

     

    Retention of Records

    Employers must retain specified records for two years.

    Employers that conduct a lay-off must retain the following records for at least two years regarding each affected Eligible Worker:

    • Full legal name
    • Job classification at the time of separation
    • Date of hire
    • Last known address of residence
    • Last known email address
    • Last known telephone number
    • Copy of the written notice regarding the lay-off

    The two-year retention period is measured from the date the written notice was provided to the Eligible Worker.

     

    Non-Discrimination

    There is a prohibition against discrimination in rehiring.

    Employers are prohibited from discriminating against or taking adverse employment action against an Eligible Worker who is experiencing a family care hardship, including the need to care for a child whose school or place of care is closed. Employers must allow requests for reasonable accommodation for the hardships. Reasonable accommodations may include modifying a work schedule, modifying the number of hours worked, or to the extent feasible, permitting telework.

     

    Penalties for Non-Compliance

    Workers may sue a covered employer for value lost in the event of a violation of the ordinance.

    Eligible Workers may bring a lawsuit in the Superior Court of the State of California against the employer for violating this Ordinance and may be awarded the following relief:

    • Hiring and reinstatement rights
    • Back pay
    • Front pay
    • Value of the benefits the employee would have received
    • Reasonable attorneys’ fees and costs

    The ordinance also does not limit an Eligible Worker’s other rights and remedies, including the right to bring claims for wrongful termination and unlawful discrimination. 

     

    Full Text

    The full text of the ordinance can be found here. 

     

    • Compliance
  2. 401(k) Update: Q3 2020

    System Administrator – Mon, 13 Jul 2020 22:34:29 GMT – 0

    Administration

    Form 5500 Season

    For calendar year plans, the 2019 Form 5500 and Form 8955-SSA (if applicable) remains due July 31, 2020 unless an application for extension has already been submitted. In most cases, the extension will be automatically prepared and filed by your retirement plan service provider on your behalf and the extended filing deadline is October 15, 2020. If you are unsure as to the status of your Plan’s Form 5500, please contact our team for assistance.

    It’s Independent Audit Time for Large Retirement Plans

    “Large” plans – those with over 100 participants on the first day of the Plan Year – should have their mandatory audits well underway. There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement, and thereafter continue being subject to the requirement while staying above the 100-participant threshold.

    Please contact Vita Planning Group if you have questions about whether the independent audit requirement applies to your Plan. For other important dates on the horizon, please check out our online Compliance Calendar.

     

    401(k) News

    Relief from Physical Presence Requirement on Certain Electronic Signatures

    Regarding certain document elections and consents, if a signature must be witnessed by a plan representative or notary public, it must be witnessed “in the physical presence” of that person according to current regulations. The IRS has recently addressed this issue considering today’s landscape and has established temporary alternative procedures that may be used to satisfy the physical presence requirement in 2020.

    For example, if a signature is facilitated by a notary public, the physical presence requirement is deemed satisfied if the electronic system for remote notarization uses live video and is consistent with state-law requirements for a notary public. Other conditions must be satisfied if a signature is being witnessed by a plan representative, such as showing photo ID during live video conference, allowing for direct interaction, scanning or faxing a signed copy of the document, and having the plan representative provide acknowledgment of witnessing the signature.

    While the new procedures are intended to help expedite access to CARES Act related distributions, it is important to note that the physical presence requirement is not typically required, except in cases where the retirement plan has an annuity component. This relief also applies to any signature that would otherwise have to be witnessed in the physical presence of a plan representative or notary, such as spousal consents. More details can be found in the IRS Notice 2020-42.

    DOL Proposed Rule on ESG Investments

    Increased awareness of socially responsible investing, also referred to as ESG (environmental, social, governance) investing, prompted the DOL to propose a new rule on June 30th regarding Financial Factors in Selecting Plan Investments. The proposed rule confirms that “ERISA requires plan fiduciaries to select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action.” Secretary of Labor, Eugene Scalia, said in a news release, “Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan…rather, ERISA plans should be managed with unwavering focus on a single, very important social goal: providing for the retirement security of American workers.”

    Vita feels that it is possible to meet participants’ desire for socially responsible investing without diminishing a plan’s adherence to its ERISA-mandated fiduciary responsibility. Our approach is explained in our Fund Selection Methodology – ESG Funds. We will continue to monitor DOL guidance and keep you abreast of any new developments in this area.

     

    Market Update

    Markets in the second quarter of 2020 reacted positively to the health, fiscal, and monetary responses to the COVID-19 pandemic by governments around the world. The US equity market had its best quarter since 1998. The S&P 500 rose almost 20% in Q2, taking back most of the loss of the first quarter and leaving the index down 5% year-to-date (“YTD”). US bond markets continued the gains made in Q1. The BarCap US Aggregate Bond Index was up 2.9% in Q2 resulting in a YTD rise of over 6% for the index. Overseas, the MSCI All Country World ex US index finished the quarter up over 22%, which left the index down 12% YTD. Progress from here will be much harder to come by. Q2 market movements will need to be validated by positive economic figures in order to maintain and extend these gains through 2020.

    While US economic data began to improve at the end of Q2 2020, we are unlikely to see a strong and sustained rebound until a vaccine and/or cure for COVID-19 can be found. Q1 US GDP fell 5% on an annualized basis. Estimates for Q2 GDP are for a fall of between 35% to 40% with the possibility of single digit positive GDP growth in the second half of the year. Initial estimates for full year 2020 GDP in the US are between minus 12% to 13%. After losing 22.5 million jobs in March and April, the US economy added back 12 million jobs in May and June as some restrictions were eased. This resulted in the unemployment rate rising to 14.7% in April before falling to 11.1% in June. It is possible that unemployed data is skewed lower by furloughed workers not having yet applied for benefits and those who have left the workforce not trying to get back in at the moment. If that is the case, it is unlikely to see single a digit unemployment rate until 2021. Inflation dipped in May but is expected to remain flat for the rest of the year even with the huge expansion of the government’s balance sheet.  

    Markets were buoyed by the speed and the size of the actions by the US Government. Congress enacted $2.4 billion of support packages to workers and businesses. Negotiations are on-going over the extension of these measures, most notably unemployment benefits to the lowest paid workers and aid to local governments. The Fed bought a record $2.5 trillion of government, agency and corporate bonds since March 23rd in order to maintain the liquidity of the financial system. The Fed is committed to a Fed Funds range of between zero and 0.25%; neither Fed Chairman Jerome Powell nor any of the 17 Federal Reserve Board members have spoken about moving to a negative Fed Funds rate. Markets are looking to the Fed to maintain this level of interest rates through 2020 and to the Congress for continued fiscal support over the summer and perhaps after the election.

    At some point, however, economic fundamentals will need to catch up with market valuations if we are to maintain the Q2 market gains. The S&P 500 forward Price/Earnings ratio rose to 21.72% at the end of June, well above its 25-year average of 16.39%. Corporate earnings in 2020 are expected to be down as much as 43% from last year. Certain sectors – utilities, technology and consumer staples – may see positive earnings growth this year, but the market as a whole is not forecast to rebound until 2021. The yield curve is expected to steepen somewhat over the course of the year, but low economic growth and continued quantitative easing by the Fed should mean that bond markets will not have to deal with the inflationary implications of the huge increase in US government balance sheet until after 2021. While the market rebound in Q2 2020 is heartening, the possibility of an uptick in COVID-19 cases, slower-than-expected GDP growth and the rhetoric of a presidential election campaign means we should expect to see continued market volatility for the rest of 2020.    

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