Workplace law update: save our small business and pension protection acts.

Question:

I heard that there was an update to the Save our Small Businesses Act and that the U.S. government has approved more visas. Can you give me further detail on the extension of the act?

Answer:

On September 30th, Congress approved a one-year extension for the Save our Small Businesses Act, which was due to expire on September 30, 2006. The Act has now been extended through September 30, 200"7. Under the extension, "the U.S. Citizenship and Immigration Service will continue to allow the exemption of existing visas from the current-year quota, thus freeing up as many as 40,000 additional visas for use by the business community" (National Club Association [NCA], October 4, 2006). The 40,000 additional visas are due to an exemption for seasonal workers who have worked under the H-2(b) visa program in any one of the three previous years.

All together, the Act provides an annual allotment of 66,000 H-2(b) visas. In the past, visas were awarded on an annual basis, so those who applied first were given the visas. This proved to be difficult for companies that needed to hire workers later in the year because one of the restrictions was that companies could not apply for a visa until four months prior to the employee's start date. Employers in the South experienced the most difficulty since their seasonal workers needed to be hired during the winter months. This dilemma was remedied with the extension because the 66,000 H-2(b) visas are being divided into two portions, "with 33,000 being reserved for the first half of the fiscal year and the remaining distributed in the second half of the fiscal year" (AH&LA, September 30, 2006).

During 2006, immigration has been at the forefront of many political discussions. It is likely that many of the estimated 11 million undocumented aliens in the United States work in the hospitality industry. The National Restaurant Association approximates that 625,000 of the undocumented workers are employed in restaurants, which accounts for one in 20 foodservice workers (Brooks, May 2006). The government has assisted with the labor shortage by extending the Save our Small Businesses Act, but there does not seem to be a long-term fix in sight. As long as there are not enough individuals in the United States to fill positions in the labor-intensive service industry, employers will have to look elsewhere.

Question:

I heard that there was a law passed this year to assist employees with their pension. Can you give me any details on this law?

Answer:

Yes, on August 17th President Bush signed the Pension Protection Act which is designed to strengthen pension programs and avoid under-funded employee retirement plans. The act requires companies to make necessary contributions to under-funded plans and make them financially whole within seven years (NCA, August 10, 2006). Employers with under-funded pension plans are unable to increase benefits while making payments to bring the plans to a viable level.

The Federal government has created an insurance system to help support businesses that are unable to make designated pension payments to their employees. This act is supposed to relieve some of the burden by forcing companies to fully fund pensions to their employees. According to the Office of the Press Secretary the legislation:

* Requires companies that under-fund their pension plans to pay additional premiums;

* Extends a requirement that companies that terminate their pensions provide extra funding for the pension insurance system;

* Requires that companies measure the obligations of their pension plans more accurately;

* Closes loopholes that allow under-funded plans to skip pension payments;

* Raises caps on the amount that employers can put into their pension plans, so they can add more money during good times and build a cushion that can keep their pensions solvent in lean times; and

* Prevents companies with under-funded pension plans from digging the hole deeper by promising extra benefits to their workers without paying for those promises up front. (Office of the Press Secretary, August 17, 2006)

The Pension Protection Act also assists those contributing to a defined contribution plan. The legislation:

* Removes barriers that prevent companies from automatically enrolling their employees in defined contribution plans;

* Ensures that workers have more information about the performance of their accounts;

* Provides greater access to professional advice about investing for retirement;

* Gives workers greater control over how their accounts are invested; and

* Makes permanent the higher contribution limits for IRAs and 401(k)s that were passed in 2001, enabling more workers to build larger retirement nest eggs. (Office of the Press Secretary, August 17, 2006)

In order to fully understand a pension plan, we first need to define the difference between a pension plan which is considered a defined-benefit plan and a defined contribution plan such as a 401(k) plan. The defined-benefit plan provides a retiree a specific amount based on the employees salary and years of service. In this case, the employer bears most of the risk because they are guaranteeing retirees a certain amount of money. Contributions to this type of plan can be made by the employee, employer, or both (Defined benefit plan, n.d.). On the other hand, the risk for a defined contribution plan is on the employee. Employees can defer some amount of their income into these plans which oftentimes is matched by their employer at a certain percentage (Defined contribution plan, n.d.). IRAs and 403(b)s are also considered a defined contribution plan.

For further information about the Save our Small Businesses Act or the Pension Protection Act contact the HFTP Research Institute. Information in this article is provided to give a general overview of the Save our Small Businesses Act and the Pension Protection Act. For specific information on a particular situation competent professional advice should be sought to address individual company issues. *

Sources

* AH&LA. (2006, September 30). Lodging Industry Priorities Approved By Congress: Seasonal Worker Relief Extension and Travel Requirements Reform Pass. Retrieved October 5, 2006, from www.ahla.com/public_ view_advisory.asp?mstr=292.

* Brooks, Steve. (2006, May). Immigration Shuffle. Restaurant Business, 105(5). Retrieved October 20, 2006, from EBSCO Hospitality & Tourism Index.

Defined Benefit Plan. (n.d.). Retrieved November 14, 2006, from www.investorwords.com/1374/defined_benefit_plan.html.

* Defined Contribution Plan. (n.d.). Retrieved November 14, 2006, from www.investorwords.com/1375/defined_contribution_plan.html.

* National Club Association. (2006, August 10). Senate Passes Pension Reform Bill While Minimum Wage Fails. Retrieved October 5, 2006, from www.natlclub.org/Article%20Links% 20HOme%20Page/reformbill.asp.

* National Club Association. (2006, October 4). Congress Passes NCA-supported H-2b Visa Legislation. Retrieved October 5, 2006, from www.natlclub.org/Article%20Links% 20Home%20Page/H2B%20visa%20 victory(rev).asp.

* Office of the Press Secretary. (2006, August 17). Fact Sheet: The Pension Protection Act Of 2006: Ensuring Greater Retirement Security For American Workers. Retrieved October 20, 2006, http://www.whitehouse.gov/news/releases/2006/08/ print/20060817.html.

Contact Information:

Tanya Venegas, Program Coordinator; HFTP Research Institute Ph: 001 [phone] or [phone] * Fax: [phone] E-mail: [e-mail] * Web: www.hrm.uh.edu/hftp