GSBE Weekly Update 11/07/2018
Governor Brown Signs AB 1654 Exempting Union Contractors from PAGA
Effective January 1, 2019, construction workers covered by certain collective bargaining agreements (“CBA”) will be exempt from the Private Attorneys General Act of 2004, commonly referred to as PAGA.
PAGA allows an aggrieved employee to bring a civil action to recover civil penalties that would otherwise only be recoverable by the Labor and Workforce Development Agency (“LWDA”) on behalf of the aggrieved employee and other current and former employees for certain violations of the California Labor Code. Under PAGA 75% of civil penalties are distributed to the LWDA and 25% are distributed to the aggrieved employees. Superior court review is required for approval of any settlement under PAGA.
Required Language in the Collective Bargaining Agreement
Under AB 1654, an employee in the construction industry is exempt from the provisions of PAGA if the employee is covered by a CBA in effect at any time before January 1, 2025 that contains the following provisions:
- A grievance and binding arbitration procedure to redress violations that would be redressable under PAGA;
- An express waiver of the requirements of PAGA in clear and unambiguous terms; and
- Permission for an arbitrator to award any and all remedies otherwise available under PAGA, except for the award of penalties that would be payable to the LWDA.
Such CBAs must expressly provide for, among other things, a grievance and binding arbitration procedure to redress violations that would otherwise be remedied under PAGA and a regular hourly pay rate of not less than 30% more than the state minimum wage.
The exemption will expire on the date the CBA expires or on January 1, 2028, whichever occurs earlier.
“Employee in the Construction Industry” Defined
AB 1654 defines an employee in the construction industry as an “employee performing work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work, and other work.”
What This Means For Employers
AB 1654 allows signatory construction industry employers to direct costly PAGA actions from a court setting to the CBA grievance and arbitration mechanism. Signatory contractors should evaluate the terms of their CBAs and consider opening bargaining with applicable unions to bargain for inclusion of the language specified in AB 1654 for the PAGA carve out to apply.
IRS: 401(k) and IRA Contribution Limits Increase
The Internal Revenue Service (IRS) has announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019.
The IRS issued technical guidance detailing these items in Notice 2018-83.
Highlights of Changes for 2019
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.
The limit on annual contributions to an Individual Retirement Arrangement (IRA), which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his/her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his/her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2019:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
- For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.
Highlights of Limitations that Remain Unchanged from 2018
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.