What kind of plan is this?

[Guest Erin, PHR]

Our company wants to set up a plan as follows:

Each Quarter profit will be assessed and if it is 5% or higher an equal percent will be paid to current employee as a bonus. Is this gainsharing, profit sharing, just a bonus??? Also, can we set our own standards or are the parameters to follow and where would I find them if they have been set?

Thanks for the help!

:confused

[JanetM]

Sounds like a bonus payroll practice. Be careful how you communicate this type of benefit. You could say that going forward you plan to make these bonus payments, and be sure to say "The Company can STOP this practice with no notice"

You did not mention making this into profit sharing plan - You could do that - give them the option of taking cash bonus or having the amount contributed to profit sharing plan - call an expert on this - depending on your situation this may not work.

[GBurns]

It is just a payroll practice until you make it formal, whether in writing or not.

Once you make it formal, it then will become part of your employee package, then you will have an ERISA plan and unless you are very careful you might end up with a FLSA issue as to whether or not this money is "expected to be paid" and become part of your hourly rate and overtime rate calculation.

I suggest that if you are going to make a formal announcement and especially if you are going to do this or expect to do this again, GET a lawyer (not an attorney) EXPERIENCED in these particular issues especially FLSA.

[E as in ERISA]

GBurns -- What do you mean by "GET a lawyer (not an attorney)"?!?! How are you distinguishing the two? The two terms are generally used interchangeably. The distinction, if any, is that an "attorney at law" is a lawyer who has actually been hired to represent or act on behalf of another in a legal matter. So, once they hire the "lawyer" then he or she becomes an "attorney"!

[Guest DMK]

I also question G. Burn's statement that once the bonus program is "formalized," it becomes an ERISA plan. ERISA covers welfare plans and pension plans. A bonus program does not constitute a welfare plan under ERISA and a bonus program will not be considered a pension plan under ERISA unless the program systematically defers payment to termination of employment or beyond (see DOL reg 2510.3-2© and several DOL opinion letters about how long a deferral period is acceptable). I don't think that just because a plan is "formal" that it automatically becomes an ERISA plan. For example, many employers have self-funded short-term disability plans that are formally documented, but since they are self-funded, they still are considered payroll practices under ERISA.

[QDROphile]

Please explain the formality that makes a bonus arrangement into an ERISA plan.

[GBurns]

My reference to Lawyer vs Attorney was partially tongue in cheek.

For many years I have observed lawyers trying to get people to refer to them as attorneys, I have always wondered if they were embarassed to be lawyers and were seeking to hide or disguise themselves as being something else.

Why someone would be embarassed to let everyone know that they were a lawyer, raises other questions, and I wonder if they are afraid that Shakespeare's alleged suggestion to "First kill all the lawyers" might become a reality.

Or they might just be embarrased by the relationship to "ambulance chasers" "Shylocks" etc.

Years ago I noted that Black's Law Dictionary (4th edition and earlier) pointed out that Attorney meant agent or representative and stated that"properly used" the term should be :

Attorney in fact

Attorney at large

Attorney at law

Etc Etc

To me that meant that any other use was "improper".

However, as we "dumbed down" our standards it eventually became common for terms and words to have new meanings. So now Black's 5 th Edition onwards states that "in common usage" attorney means attorney-at-law unless a contrary meaning is clearly intended.

To many people of my generation this is a "sell out "of standards. If I were a lawyer I would be embarassed to have to disguise what I do and be ashamed that I had to refer to my occupation as something other than what it really was.

As Katherine (possibly a lawyer in a defensive mode) points out. a lawyer is not an attorney until he/she is representing someone. As per my post, when not representing a client the person is only a lawyer. AFTER that lawyer's services is engaged THEN and ONLY then does that lawyer become an attorney-at-law. NOT BEFORE such engagement.

I did not intend any disrespect for lawyers, I was only trying to get Erin, PHR away from the hype of those who were apparently embarrased by their calling, and onto those who could adequately represent Erin in the particular issue.

It is my opinion that if you are too embarassed by what you do so that you have to disguise it, chances are you are not competent enough to represent me. For the record, I have been a named party in over 20 lawsuits since 1980 and as a result have seen a whole lot of incompetent and/or inadequate legal representation.

I will stand by the old definition and not succumb to popular usage. The English language has suffered enough and I will not contribute to its further demise. I have had enough of mis-quotes etc etc.

Gay now has a new meaning and we can no longer "Don we now our gay apparel"

"Eat your cake and have it too", a major challenge is now "Have your cake and eat it too", an easy thing to do.

We have really "dumbed down" America and I will not be a party to this.

[QDROphile]

I would still like to know how "formalizing" a bonus arrangement turns it into an ERISA plan.

[mbozek]

A bonus program is not subject to ERISA if it does not systemically defer payment of benefits until termination of emplyment or retirement. Many non ERISA bonus programs are formalized to make sure that they are not subject to ERISA. See DOL op. ltr 2002-13A