Executive Comp Exchange

On December 1, 2016, the most significant changes to federal overtime law in more than a decade will go into effect. The federal Department of Labor instituted these changes by amending the Fair Labor Standards Act regulations. The primary change is that the minimum amount employers will be required to pay exempt salaried employees will increase substantially. Employers will be required to pay exempt workers at least $913 per week ($47,476 per year), up from the current requirement of $455 per week ($23,600 per year).

In light of the new final and temporary regulations issued by the IRS and the U.S. Department of Treasury (Reg. 301.7701-2T), partnerships that have been using wholly-owned disregarded entities to “employ” partners (in order to provide access to various tax benefits, including cafeteria plans, parking and transit benefits, and other employee benefit plans) will need to reevaluate their structure and treatment of partner/employee classification. In the new rules, which were published on May 4th, 2016, the IRS moved to halt this practice, providing that where partners of a partnership are separately working for a second (disregarded) subsidiary legal entity, such individuals may not be treated as employees of the subsidiary. Instead, they are considered self-employed individuals for both self-employment and employment benefit plan purposes.