Daily Compensation & Benefits Newswire
News To Use
For the latest SHRM-produced news and features, jump to SHRM Online's Benefits Discipline
and Compensation Discipline
For links/summaries to some of the best external compensation/benefits stories on the web, see below.
-------------------------------
Reform Won't Rein in Health Care Costs; Employers Can
Health care reform legislation will do nothing to "bend the curve" of rising health care costs because it won't address a main cause health care inflation—the fee-for-service system that pays doctors and hospitals for the amount of medical care delivered rather than for its quality—reports BusinessWeek.
But with health care costs that keep rising 6% to 7% every year—even during this year of negative overall inflation—plenty of employers are figuring out how to offer better care for less money.
-
Key steps include developing a healthier workforce, better managing chronic diseases, and encouraging informed decision-making by health care consumers. It's becoming an old refrain, but these actions produce results.
11/20/09
-------------------------------
Senate's Health Care Bill Revises Employer Mandate
The employer mandate in the $849 billion health care bill that the Senate will now debate differs from the House version, reports CNNMoney.com.
Under the Senate bill, businesses with more than 50 workers, where at least one employee qualifies for government subsidies, would face a penalty of $750 for every full-time employee if it does not offer health care coverage—known as pay-or-play. That would cover most larger businesses unless all employees are highly paid, since low and middle income individuals and families would in many cases qualify for government assistance, or subsidies, if they can’t obtain insurance through their employer (or don’t have an employer).
- If passed by the Senate, the bill would have to be reconciled with the mandate in the House version, under which only businesses with payroll of less than $500,000 are exempt from a play-or-pay mandate. Otherwise, the House measure would require employers not providing sufficient coverage to pay the government up to 8 percent of the company's payroll.
11/19/09
-------------------------------
DOL Withdraws Investment Advice Rule
On November 19, the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) issued an announcement withdrawing the final rule on the provision of investment advice to participants in 401(k)-type defined contribution retirement plans under the Employee Retirement Income Security Act's prohibited transaction provisions. The regulatory action is to be published in the November 20 edition of the Federal Register.
Just two day earlier, the DOL had extended the applicability and effective dates of the final rule until May 17, 2010. That extension expired upon the effective date of this withdrawal.
- The DOL had indicated it intends to publish a new proposed rule that more severely limits the ability of plan service providers to confer investment advice to plan participants.
More: Investment News reports, "While experts anticipated that the DOL would make the rule more restrictive, they now wonder if the agency is being pushed by Congress to hold off on passing regulations until Congress addresses the issue itself. 'It seems like someone in Congress gave the order to stand down,' said Jason C. Roberts, a partner at law firm Reish & Reicher.
11/19/09
-------------------------------
Mammogram Coverage Won't Change, Insurers Say
Insurance companies say they will continue paying for annual mammograms amid widespread fears that new breast cancer screening guidelines from a federal task force could lead women to lose coverage for those tests, reports USA Today.
The guidelines – suggesting that most women under 50 don't need routine mammograms and that women over 50 need them only every other year – were issued by the U.S. Preventive Services Task Force. Leaders of the American College of Radiology and the Society of Breast Imaging issued statements that the new recommendations looked like an effort to cut costs. And the Wall Street Journal editorializes that the mammogram decision is a sign of cost control to come.
- A spokeswoman for WellPoint told USA Today that the insurer considers the task force's recommendations, but also weighs advice from the American Cancer Society and American College of Obstetrics and Gynecology, which still recommend annual screenings beginning at age 40.
11/19/09
-------------------------------
Beer Distributor Workers Win $41 Million in Back Pay
A case of bad-faith bargaining involving five southeastern Michigan beer distributors and their union employees has concluded after more than a decade with workers sharing in a $41-million payment, the National Labor Relations Board said, reports the Detroit Free Press.
The union filed charges of bad-faith bargaining and sought back pay from April 1991 through June 1998 -- and a subsequent investigation uncovered an illegal mutual aid pact among the companies. An administrative law judge ruled on the Teamsters' behalf and the employers' appeals failed. The U.S. Supreme Court declined to hear the employers' appeal
Split among 2,000 employees, the individual awards ranged up to a $282,000 award for back pay made to James Radulski, a 58-year-old man who left Hubert Distributors in Warren, Michigan, late last year. He said he still suffers medical problems from work he should not have been made to do.
11/19/09
-------------------------------
Final Investment Advice Rule Delayed Yet Again
In September 2009, the U.S. Department of Labor (DOL) indicated its intention to thoroughly revise the final investment advice rule issued by the departing Bush administration in January 2009 (see Labor Department to Drop Bush Administration Investment Advice Rule). Technically, at that time the department issued a delay of the regulation's "effective and applicability date" until November 18, 2009.
- On November 17, 2009, the DOL issued a subsequent announcement further delaying until May 17, 2010, the final rule's implementation, "to allow additional time for the department to complete its analysis of questions of law and policy concerning the rules." The DOL has indicated that the eventual final rule will be thoroughly revised prior to its eventual implementation in order to further restrict the ability of defined contribution plan service providers to offer advice to plan participants.
11/18/09
-------------------------------
Healthy Worker Programs Survive Economic Crisis
Keeping workers healthy, happy and at work through wellness programs remains a priority for many companies despite financial pressures from the global economic downturn, reports Reuters, citing a new study by Buck Consultants.
Wellness programs are most common in North America, where 75 percent of employers offered them, but are also growing in popularity elsewhere in the world. U.S. employers are paying on average about 80 percent of the cost of health care for their employees.
- Stress was the main health risk driving employers in Africa, Asia, Australia, Canada and Europe to implement a wellness strategy, while in Latin America and the United States it was driven by a need to encourage exercise.
11/17/09
-------------------------------
Drug Makers Raise Prices in Face of Health Care Reform
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years, reports the New York Times.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.
11/16/09
-------------------------------
DB(k) Alongside 401(k) Is Pension Alternative
Available in January 2010, the new DB(k) offers a guaranteed pension-like retirement benefit alongside a 401(k), for companies with fewer than 500 workers, reports the AP (via the Washington Post).
Companies choosing to offer a DB(k) will be required to establish a pension fund sufficient to pay a worker in retirement up to 20 percent of that individual's average annual pay received during the last few years of work. After three years with a company, a new employee's benefits would be vested. Alongside that benefit, the company would automatically take 4 percent of a worker's pay and put it in a 401(k) plan. The company must match 50 percent of that amount, which would be immediately vested.
- Many details about the practical operations of DB(k) plans will not be known until the IRS and Treasury officials complete and publish the final rules, which could affect the number of interested companies.
11/16/09
-------------------------------
Sixth Straight Month of Pension Funding Declines
The 100 largest U.S. defined benefit pension plans experienced asset decreases of $7 billion and liability decreases of roughly $3 billion in October, resulting in a $4 billion decrease in funded status. The funded ratio decreased from 75.3 percent to 75 percent, according to analysis by Milliman Inc, an actuarial and consulting firm.
"We've seen six months and counting of pension funding declines," said John Ehrhardt, co-author of the Milliman 100 Pension Funding Index. "This month, though, we saw a reversal of the recent pattern, with the decline driven by a reduction in assets rather than by an increase in liabilities, as has been the case for several months prior."
- Over the last 12 months, the cumulative asset return has been 9.12 percent and the funded status has fallen by $68 billion. For these 12 months, the funded ratio of the Milliman 100 companies has fallen from 93.8 percent to 75.0 percent.
11/12/09
-------------------------------
IRS Announces Relief for Hybrid Plans Pending Upcoming Regulations
On Nov. 10, 2009, the IRS issued Announcement 2009-82 providing relief for plan sponsors of hybrid defined benefit pension plans (including cash balance plans) to comply with the Pension Protection Act of 2006 (PPA) requirement to not have interest crediting rates in excess of a market rate of return.
Under the PPA, a hybrid pension plan will not satisfy the age discrimination rules if it credits interest at a rate that exceeds a market rate of return. The PPA provides relief from the anti-cutback rules for plan amendments that would reduce an above-market rate of return to a market rate, but this relief expires at the end of the 2009 plan year.
Announcement 2009-82 confirms that:
- The IRS will soon issue final and proposed regulations regarding what constitutes a "market rate of return."
- The market-rate-of-return regulations will not go into effect before the first plan year that begins in 2011.
- Plan sponsors making a rate-of-return amendment before the effective date of the regulations will not violate Internal Revenue Code Section 411(d)(6) (regarding protected benefits) even if done after the last day of the first plan year beginning in 2009 (the PPA remedial amendment period).
- There is special deadline relief for the 204(h) notice (the notice of an amendment that would possibly reduce future benefit accruals) completed for an amendment that is effective not later than the first day of the first plan year that begins on or after January 1, 2010. That notice is due 30 days after the effective date of the amendment (instead of the typical 45 days before).
11/12/09
-------------------------------
Severance Pay: Comfort, Then Crisis
Overall, companies have been eliminating or trimming severance packages. For those who do receive severance, the median pay allotted is 12.5 weeks' salary, down from 21.8 weeks a decade ago, according to outplacement firm Challenger, Gray & Christmas, reports the Wall Street Journal.
Hefty severance packages, while intended as a safety net, can lull the unemployed into a false sense of security. Some people continue spending as before. Others choose not to take positions available that offer a lower salary then they were previously earning.
- A former $200,000-a-year chief executive officer of a small bank hasn't worked since March 2008, when he was laid off. He recently turned down an offer and a contract for a CEO position at a credit union. The salary was $60,000 less than what he earned before, and the position didn't include a guarantee of severance pay.
11/12/09
The Return of 401(k) Matching, with a Few Twists
The 401(k) match is coming back. Unfortunately, some will be skinnier than they were before, reports SmartMoney (via Fidelity).
One of the biggest changes is that some companies are beginning to base the 401(k) match on corporate performance. In a Watson Wyatt survey, 17% of the companies bringing back the match said the size of the new match will vary depending on profits. A possible scenario: The company starts off with a match of 25 cents per dollar contributed to the plan up to 6% of pay. If the company reaches its stated profit goal, it will up the match to dollar-for-dollar. (The most common formula used by companies is a match of 50 cents on the dollar up to the first 6% of pay.)
- Other companies are distributing the match money at the end of the year in a lump sum instead of making ongoing contributions. In this case, companies may not be changing the match percentage or amount they’re contributing but are waiting to allocate it until the following year and using that cash flow for other purposes in the meantime.
11/11/09
---------------------------------------
Health Bills Don't Address Runaway Health Costs, Experts Say
As health care legislation moves toward a crucial airing in the Senate, the White House is facing a growing revolt from some Democrats and analysts who say the bills Congress is considering do not fulfill President Obama’s promise to slow the runaway rise in health care spending, reports the New York Times.
Experts — including Dr. Denis A. Cortese, chief executive of the Mayo Clinic — say the measures take only baby steps toward revamping the current fee-for-service system, which drives up costs by paying health providers for each visit or procedure performed.
- Senators of both parties say they will press for more aggressive cost-cutting measures when the bill comes up for Senate debate. But drastic changes in the health care reimbursement system could cost the White House the support of doctors and hospital groups, who have signed onto the legislation and are lobbying hard to keep the current fee-for-service system.
11/10/09
COBRA Expansion Bills Introduced
Two bills were introduced in the House in late October to expand the COBRA subsidy program created by the American Recovery and Reinvestment Act of 2009 (ARRA), reports Infinisource.
Under the more expansive of the two bills, HR 3930, the ARRA subsidy program would continue for involuntary terminations and loss of coverage occurring through June 30, 2010, and all ARRA subsidies would continue for up to 15 months, instead of the current nine months (subject to a limitation that all subsidies would end by December 31, 2010). The second bill, HR 3966, would simply extend the ARRA subsidy program for involuntary terminations and loss of coverage occurring through June 30, 2010.
- Both bills are a long way from becoming law, but the growing consensus is that an ARRA expansion bill is likely to pass within the next three months as unemployment continues at high levels.
11/5/09
---------------------------------------
Global Wages Falling This Year, UN Says
Real wages fell in the United States and some other wealthy nations in the second quarter of the year, raising questions about whether workers are sharing in any economic recovery, the U.N. labor agency said, reports MSNBC.com.
Monthly wages have fallen almost 2% in the United States since January, said Patrick Belser, an International Labor Organization economist.
- Inflation-adjusted wage growth fell sharply around the world last year to 1.4%, from 4.3% in 2007.
11/3/09
---------------------------------------
Executive Pensions Rose in ‘08 Even as Stocks Fell: Report
Pensions for top U.S. executive rose by an average of 19% last year, and more than 200 officers saw their retirement savings surge by as much as 50%, even as their companies’ stock prices fell, reports Reuters, citing coverage in the Wall Street Journal.
Pensions rose as a result of generous formulas and some little-scrutinized techniques, such as changes in age or interest rates used in calculations, according to an analysis of filings from 340 Standard & Poor's 500 companies.
- Executive pensions went up even as stock prices dropped by an average of 37% last year, taking into account supplemental executive retirement plans (SERPs), which are often overlooked.
11/3/09
---------------------------------------
Wal-Mart Wins Final Approval of Wage Suit Settlement
Wal-Mart Stores Inc., the world’s largest retailer, won final approval of a settlement paying as much as $85 million to hourly workers who sued over allegations of unpaid wages, reports Bloomberg.com.
The workers claimed that Wal-Mart violated wage-and-hour laws by denying them rest breaks and manipulating time cards to reduce their pay. The accord is part of a global $640 million resolution of wage-and-hour claims reached in December between Wal-Mart and workers.
- A U.S. district judge approved the settlement and awarded one-third of the recovery in fees to the workers’ lawyers, up to about $28 million depending on the claims made. Wal-Mart is to pay at least $65 million and as much as $85 million.
11/3/09
-------------------------------
Five Health Care Culprits Cost $1 Trillion
Experts say simple lifestyle changes such as cutting back on certain foods and not smoking could substantially shrink our medical bills, reports CNNMoney.com.
CNNMoney.com spoke to health care experts about hidden health culprits that are adding billions of dollars to our medical bills, and singled out five key culprits:
- Smoking. Tobacco use is the number one preventable cause of disease, disability and death in the United States, according to the Centers for Disease Control (CDC), which estimates that about 44 million American adults smoke cigarettes.
- Sugar plus inactivity. Obesity accounts for 9%, or almost $150 billion, of all medical spending. That's up from 6.5% in 1998.
- Salt. Excessive sodium consumption is a leading cause of hypertension, high blood pressure and other cardiovascular diseases in the United States.
- Alcohol. Nearly a quarter of general hospital admissions in the U.S. are either directly or indirectly related to alcoholism.
- Pollution. Air pollution, including toxic effects of pesticides or other gases, is linked to premature mortality and morbidity via chronic bronchitis and asthma.
11/3/09
-------------------------------
Bill Would Extend Time to Fund Pension Plans
A bill introduced in the U.S. House on Oct. 27 seeks to give companies more time to replenish inadequately funded employee pension plans, reports the New York Times.
To discourage companies from joining the many businesses that have frozen pension benefits for workers, the proposed Preserve Benefits and Jobless Act (H.R. 3936) would give employers up to 15 years to fully fund their plans if they agreed not to freeze benefits. But while delaying pension contributions would ease that cash squeeze, it would impose more risks on the federal Pension Benefit Guaranty Corp., which pays retirees’ benefits when a company’s pension plan fails.
- An alert by The Segal Group, an benefits consultancy, comments that any pension relief that gets enacted in 2009 is likely to be modest and temporary, targeted at problems created by the 2008 market crash.
11/2/09
---------------------------------------
Senate Hears Testimony on Target-Date Funds
A hearing by the Senate Special Committee on Aging on Oct. 28 highlighted some of the risks and potential conflicts of interest in target-date mutual funds, reports the San Francisco Chronicle.
The most conservative target-date funds, for employees retiring in 2010 or before, lost 23 percent on average last year. The committee heard that 2010 funds had anywhere from 26 to 72 percent of their assets invested in stocks, producing widely varying returns. For example, the 2010 fund in the Thrift Savings Plan for federal employees had 30 percent of its assets in stock in January and fell just 10.5 percent in 2008.
- A related issue: Whether a fund with a 2010 target date should assume that an investor will withdraw the money in a lump sum in 2010 or leave it in throughout retirement, which could be decades longer. Most target fund managers assume the latter, whereas many investors do the former, the committee heard.
10/29/09
-------------------------------
401(k) Participants' Disconnect
Mike Henkel, former president of investment research firm Ibbotson Associates and now managing director at Envestnet, offers advice to 401(k) plan sponsors, via the latest PIMCO DC Dialogue e-newsletter. Henkel advises:
We need to show participants the potential income they might have in retirement based on how they save and invest. People need a report that shows, "If you continue using this target-date fund or current strategy, with this savings rate, and this asset mix, along with this particular retirement date and target retirement income—which is calculated on a percentage of current income—then when you retire, your chance of attaining your target income is 'X' percent." . . .
One scary thing to emerge from [a recent survey on the use of target-date funds] came from a request to rank five decisions from most to least important. The most important decision in participants' minds was to pick the correct target-date fund. . . . Participants then ranked savings rate at number five, the least-important decision. In truth, however, people's priorities should be the complete reverse.
10/29/09
---------------------------------------
Few Raising Expatriate Compensation in 2010
Most global companies (67 percent) are keeping expatiate compensation the same next year. Very few companies (7 percent) are increasing the compensation of their expatriate talent, but just over one-quarter (26 percent) are decreasing it, according to Sibson Consulting's Expatriate Talent Market Trends Survey.
- While the high-cost expatriate compensation packages of recent years will likely remain a thing of the past, multinational companies, especially those doing business in developing countries, still require the broad experience and expertise that expatriates bring, and they are willing to pay for it.
10/28/09
---------------------------------------
Health Premiums Spike in Massachusetts, Despite Reform
Three years after Massachusetts enacted its sweeping health reform legislation, the state has the highest health insurance costs in the nation, averaging $13,788 for a family, according to the Kaiser Family Foundation, reports the Wall Street Journal.
The state's major insurers plan to increase premiums by 7% to 12% next year, with small businesses facing the largest increases. Those premiums may be going up because more people are in plans that pay doctors and hospitals at lower, government rates, causing a shift in costs to private insurance payers.
- The actuarial firm Milliman Inc. estimates that the average U.S. family in a private plan pays an additional $1,788 a year to compensate for lower payments by public plans, representing a hidden tax on private insurance.
10/28/09
-------------------------------
Who Picks Up the Tab for Health Reform?
The odds are shifting in favor of health care reform legislation making it through Congress this year, reports BusinessWeek, although battles will erupt when the Senate and the House begin to work on the final bill.
- Meanwhile, "the 85 percent of citizens with insurance of any kind…should probably assume that most costs levied on other parties to health reform will be passed along to them through higher premiums," the magazine reports.
10/26/09
-------------------------------
GM Salaried Staff Get Only Consumer-Driven Health Plans
General Motors Co. will offer only high-deductible consumer-driven health care plans to its 24,000 salaried employees, effective Jan. 1, reports Business Insurance.
GM salaried employees will choose from two plans, both linked to health savings accounts (HSAs). Under one plan, the deductible will be $1,300 for single coverage and $3,100 for family coverage, with a maximum annual out-of-pocket expense of $2,200 for those with single coverage and $5,000 for family coverage. Employees will pay monthly premiums ranging from $5 for those with single coverage and $15 for those with family coverage.
In the other CDHP, deductibles also will range from $1,300 to $3,100, but GM will cover all eligible in-network expenses after the deductibles are met. The monthly premiums for that plan will range from $25 for individual coverage to $75 for those with family coverage.
- In addition, GM will contribute $1,300 to employees’ HSAs.
10/23/09
---------------------------------------
Study: CEO Retirement Packages Hurt Stock Prices
Companies that bestow a lavish supplemental executive retirement plan (SERP) on chief executives can see their shares suffer after those executives leave, reports Reuters, citing a study by Prof. Paul Kalyta of McGill University in Montreal.
A SERP "gives CEOs nearing retirement an impetus to goose earnings, perhaps by pushing revenue forward while delaying expenses," the paper reports. For Fortune 1000 companies in the 1997-2006 period, stock prices lagged those of peers by 8.3 percent over three years following the retirements of CEOs who had big incentives to do well in their last years.
- "It doesn't make any economic sense that a CEO should receive retirement benefits based on one or two years of good performance," Kalyta said. "It should definitely be tied to long-term performance, perhaps over 15 to 20 years, so that CEOs don't have an incentive to manipulate earnings in the short term."
10/23/09
Pay Czar Seeks to Slash Compensation at Bailed-Out Firms
The U.S. government will demand a sharp cut in pay for top executives at the largest bailed-out companies, reports USA Today. (Also, the law firm Winston & Strawn offers Details on the Pay Czar's Cutbacks on Executive Pay).
Pay czar Kenneth Feinberg is recommending a 50% drop in total compensation from last year for the 25 highest-paid employees at seven companies that took the largest sums of bailout money. He is also recommending that 90% of the executives' pay, primarily cash bonuses, now be paid in stock. They would not be allowed to sell the stock for a few years, in a bid to better align their pay to their companies' long-term performance. Additionally, executives who want their companies to pay more than $25,000 for special perks, such as country club memberships, private planes or limousines, will have to make a separate application to Feinberg's office.
- Lawmakers said Feinberg's proposals are necessary to protect the taxpayers' investment in those companies. However, others say they are not comfortable with Washington setting compensation at privately run companies.
10/22/09
---------------------------------------
Companies Plan to Restore 401(k) Matches
Many U.S. businesses are quietly restoring plans to match a portion of their employees' 401(k) contributions, reports the Wall Street Journal. About half of the companies that suspended matches will be restoring them in 2010, according to Hewitt Associates.
Until recently, many employers have offered up to 6% of gross pay. Some companies are considering offering a lower match or using a tiered approach, which takes into account a person's length of employment. Additionally, more companies are planning to make the match dependent on the company's profitability.
- Companies may also choose to distribute benefits at year-end, which means employees could miss out on the distribution if they leave before then.
10/22/09
-------------------------------
PBGC Premium Rate to Rise Slightly in 2010
The premiums that employers with defined benefit plans pay the Pension Benefit Guaranty Corp. (PBGC) will increase slightly next year, reports Business Insurance.
The base annual premium will increase to $35 per plan participant from the current level of $34. That increase is a result of a federal law that requires that the premium be adjusted to reflect changes in the national average weekly wage during the prior year.
- The premiums collected by the PBGC are used to help pay benefits to participants in plans taken over by the PBGC, which in fiscal 2008 had a $10.7 billion deficit in its single-employer insurance program.
10/22/09
-------------------------------
401(k) Accounts Rebound, Surprisingly
Despite the biggest and broadest decline in financial markets in a generation, the median 401(k) retirement account at Vanguard Group was up 7% on Sept. 30, 2009, from where it was two years earlier, when the market was near its all-time high, reports the Wall Street Journal.
Younger people—those under 35—fared much better, with more than three-quarters of their retirement accounts even or ahead of September 2007.
- To be sure, the results are quite uneven—and they don't mean that investors have recovered all of their principal. Many people are still showing substantial losses, especially if they were heavily invested in stocks or stopped adding to their accounts, or both.
10/21/09
-------------------------------
Reform Bill Might Threaten FSAs
Some benefit plan administrators say trying to raise tax revenue by imposing caps on flexible spending account (FSA) contributions could shut down the FSA program within 10 years, reports National Underwriter.
The administrators are trying to draw attention to a provision in the Senate Finance Committee’s health bill proposal -- the America’s Healthy Future Act draft -- that would limit annual FSA contributions to $2,500. The cap would not be indexed for inflation.
- Inflation could reduce the value of the $2,500 cap on FSA contributions over time, greatly reducing the value of maintaining FSAs plans.
10/21/09
-------------------------------
Most Companies Cutting Bonuses, Raises
More than half of U.S. companies are reducing bonuses, and nearly half are scaling back on raises in an effort to cut costs in a tough recession, reports Reuters (via USA Today), citing a survey of U.S. financial executives by accounting and advisory firm Grant Thornton.
A third of companies are cutting back on employee health care benefits, and a third are cutting back on stock options and other equity-based compensation to trim costs.
- Asked in the recent study what pricing pressures are most concerning, 77% said employee benefits such as health care and pensions, distantly followed by energy costs at 35% and raw materials at 30%.
10/20/09
-------------------------------
Rising Number of Women Earn More than Mates
While the stereotype of the male breadwinner is still alive in many people’s minds, experts say the reality is that a growing number of women are earning as much, if not more than, their husbands, reports MSNBC.com.
The recession has likely exacerbated the trend; nearly three-quarters of the approximately 7 million people who have lost jobs in this recession have been men. The unemployment rate for adult men stood at 10.3 percent in September, compared with 7.8 percent for women.
- In a recent survey, 65.3% of women and 61.2% of men strongly agreed with the idea that they are comfortable with women earning more than men in a household.
10/19/09
-------------------------------
Making Sense of High-Deductible Health Plans
Consumer-directed health plans can save U.S. employers as much as 20 percent, compared with traditional insurance, reports the New York Times. That’s a big reason why the number of workers enrolled in high-deductible plans at companies with more than 200 employees reached an estimated 22 percent in 2009, from 10 percent in 2006.
Many employers are raising premiums on traditional HMO and PPO plans as a way to further encourage employees to pick the high-deductible option (The lower premiums a high-deductible plan offers are usually about 20 percent less than traditional insurance). Those higher premiums might come closer to offsetting higher out-of-pocket costs of the high-deductible plans, even for employees with chronic conditions.
- As companies shift to plans linked to health savings accounts, many will contribute a lump sum to employees’ accounts — anywhere from $500 to $1,000 — as an incentive for them to sign up for the consumer-directed plan.
10/19/09
-------------------------------
More Aggressively Automatic 401(k)s
Employers are taking more aggressive control over their employees' 401(k) accounts, reports the Wall Street Journal.
Barclays PLC's Barclays Global Investors now urges employers to automatically direct 8% of workers' pay into 401(k) savings and build from there. T. Rowe Price Group Inc. in the past year has seen a sharp increase in plans moving all participants into target-date retirement funds -- even if those participants previously selected their own investments. Prudential Financial Inc. encourages employers to prohibit workers from borrowing against their retirement savings.
- More than half of plans signing up for T. Rowe's 401(k) recordkeeping services in the past year have used a "re-enrollment" strategy, defaulting all participants into target-date funds unless they opt out. That is up from roughly 30% a year earlier.
10/19/09
-------------------------------
A bad economy and low inflation are starting to drag down wages for millions of everyday workers and freeze benefits for millions of retirees, reports USA Today, citing the latest figures from the U.S. Bureau of Labor Statistics.
Average weekly wages have fallen 1.4% this year for private-sector workers through September, after adjusting for inflation, to $616.11, a USA TODAY analysis of Bureau of Labor Statistics data found. If that trend holds, it will mark the biggest annual decline in real wages since 1991.
- Prices measured by the CPI are down 1.8% from their peak in July 2008. That trend is upsetting a wide range of wage-and-benefit packages, as nearly 80 million people have wages or benefits tied to changes in the consumer price index. Those include contracts for 2 million unionized workers. But most states do not cut minimum wages when prices fall.
10/16/09
-------------------------------
Wellness Incentives Could Create Health Care Loophole
Get in shape or pay a price. That's a message more Americans could hear if health-care reform provisions passed by the Senate finance and health committees become law, reports the Washington Post.
- By more than doubling the maximum penalties that companies can apply to employees who flunk medical evaluations, the legislation could put workers under intense financial pressure to lose weight, stop smoking or even lower their cholesterol.
10/16/09
-------------------------------
'Cool' Jobs and Same-Sex Benefits
The government's chief human resources officer told lawmakers that they need to approve a bill that extends full benefits to the domestic partners of gay and lesbian federal employees to ensure that the government remains competitive with the private sector, reports the Washington Post.
"Young people are looking at this as an indicator that says, do you have this, and if not, this is not a cool place to be," Office of Personnel Management Director John Berry said at a hearing of the Senate Homeland Security and Governmental Affairs Committee.
- More than 34,000 federal employees live in committed same-sex partnerships, and more than 30,000 of them have partners who are not federal employees, according to estimates in a 2007 University of California at Los Angeles study.
10/16/09
-------------------------------
Retirement Plan Maximums to Remain Flat for 2010
The maximum contribution that can be made to 401(k) and other defined contribution plans, and the maximum benefit that can be funded through defined benefit plans, will stay the same in 2010, reports Pensions & Investments. (The IRS announcement is here.)
As a result, the maximum annual contribution an employee can make through salary reduction to a 401(k) plan will remain at $16,500 in 2010, while the so-called catch-up contribution that employees age 50 and older can make to 401(k) and certain other defined contribution plans will stay at a maximum of $5,500. The maximum contribution to defined contribution plans will remain at $49,000 per participant, which includes employer contributions.
The maximum annual benefit that can be funded through a defined benefit plan in 2010 will remain at $195,000, while the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will remain at $245,000.
- The definition of a highly compensated employee for 401(k) plan non-discrimination testing purposes in 2009 — employees who earn at least $110,000 a year — will be the same in 2010.
10/15/09
-------------------------------
Senate Finance Committee Bill: Key Provision Affecting Employer-Provided Plans
On Oct. 13, the U.S. Senate Finance Committee (SFC) voted 14-9 to pass its health reform bill out of committee, with Sen. Olympia Snowe (R-Maine) the only Republican senator to vote for the bill. The Senate Finance Committee released a statement that includes a detailed summary of the bill, which Senate leaders must now merge with the provisions of other Senate bills, and then be reconciled with a House version of reform.
Highlights of the SFC bill, as summarized by a Sibson Consulting alert, include:
- Beginning in 2013, a 40% excise tax will be imposed on the cost of health plans above a threshold of $8,000 for single coverage and $21,000 for family coverage.
- Salary reduction contributions for health flexible spending accounts (FSAs) would be capped at $2,500 beginning in 2011.
- The deduction for the Medicare Part D Retiree Drug Subsidy would be eliminated for employers, significantly affecting retiree health costs for employers with a tax liability.
- The penalty for use of Health Savings Account funds to pay for non-qualified medical expenses (prior to age 65) would increase from 10% to 20%.
- Group health plans would be permitted to use rewards or penalties for participation in a wellness program that may be as high as 30% of the cost of coverage (as opposed to the current HIPAA nondiscrimination rules that cap the maximum reward/penalty at 20%). The Departments of Health and Human Services, Labor, and Treasury would have the discretion to increase the percentage to 50%.
- While employers would not be required to offer health coverage, effective July 1, 2013, all employers with more than 50 employees who do not offer coverage will have to reimburse the government for any health tax credit a low-income employee receives who is eligible to purchase coverage through the health insurance exchange. The maximum penalty is $400 times the total number of employees. Employees would only be eligible to purchase coverage through a exchange if they are offered employer-sponsored coverage that does not have an actuarial value of at least 65% or that is unaffordable. Unaffordable coverage means coverage costing more than 10% of the employee's income.
The American Benefits Council, a national trade association for companies concerned about federal legislation and regulations affecting the employee benefits system, has prepared a list of priority employer issues for lawmakers to consider during the health care debate.
-------------------------------
More Employers Push Ineligible Dependents Out of Health Plans
More U.S. employers are cracking down on workers who enroll ex-spouses, over-age children, grandchildren and others not entitled to coverage under their health plan, reports the Washington Post.
Dependent eligibility audits, where employers demand that workers and retirees show documents proving that their claimed dependents qualify for health benefits, are quickly becoming the norm. More than 60 percent of large U.S. companies conducted such audits this year, compared with fewer than half in 2007, according to Watson Wyatt. Even more companies are expected to conduct such audits next year.
- A recent audit of 14,000 dependents and spouses on Johns Hopkins' health plan turned up 454 ineligibles. Culling them saved the university an estimated $2 million a year.
10/13/09
-------------------------------
Small Businesses Worry About Health Mandates
U.S. small businesses are wincing at proposed mandates to provide coverage for every employee or pay a penalty equal to as much as 8 percent of payroll, reports the San Diego Tribune.
The leading Senate proposal includes a “pay or play” provision that would apply to businesses with more than 50 employees. Rather than imposing higher payroll taxes on companies that don't offer health insurance, it would fine them up to $400 for each worker receiving government-subsidized coverage outside work.
- Some advocates for small businesses are backing the creation of exchanges where health insurance plans can be compared against one another in an effort to boost competition and drive down prices.
10/13/09
-------------------------------
Insurance Industry: Expanded Coverage Mandates Will Mean Higher Premiums
America’s Health Insurance Plans, which represents the U.S. insurance industry, issued a report warning that health care reform legislation before the Senate would drive up premiums for individual and employer-provided health coverage, rather than making coverage more affordable, reports the New York Times. The research for the report, which can be viewed here, was conducted with PricewaterhouseCoopers.
“The overall impact will be to increase the cost of private insurance coverage for individuals, families and businesses above what these costs would be in the absence of reform,” said Karen M. Ignagni, president of the trade association.
- Democrats disputed the conclusion, claiming the bill would provide tax credits to millions of people to help them afford coverage, and would provide administrative savings.
10/12/09
-------------------------------
401(k) Investors: Hit Hard in '08, Doing Better Now
The financial crisis pounded investors, badly. But 401(k) participants have since prevailed over the most punishing market in decades, reports CNNMoney.com.
Taking into account both contributions and investment return, the average 401(k) balance among people who had their accounts for five years fell 24.3% in 2008, according to the Employee Benefit Research Institute and the Investment Company Institute. Among all 401(k) participants, the average balance fell 30.5%
- Thankfully, that's not the end of the story. Many investors have recouped a lot of what they lost. There are two reasons: the stock market has been on a fairly steady upward march in the past several months; and most participants have kept making contributions to their 401(k)s despite the crisis.
10/8/09
-------------------------------
Social Security Promises Less than Guaranteed
Social Security provides a majority of the retirement income for about two-thirds of Americans older than 65, but employees in their mid-50s or younger are highly likely to get less than is being promised, reports the Pittsburgh Tribune-Review. The program's dismal outlook has long been known, but the recent economic crisis further scarred the program's finances, bringing closer the day of reckoning when receipts no longer cover benefit payouts.
That's bad news for anyone in their mid-50s or younger, because proposals that aim to put the system on sound financial footing almost invariably protect current beneficiaries and people near retirement age, but everyone else can expect benefit cuts, tax increases or a bit of both, the paper reports.
- "The chance that people won't receive their full promised benefits is actually quite high," said Andrew Biggs, a resident scholar at the Washington-based American Enterprise Institute and a former deputy commissioner for policy at the Social Security Administration. "How big those benefit cuts will be and who they might affect is an open question."
10/8/09
-------------------------------
Health Care Reform: How Much Competition?
Sen. Ron Wyden, D-Oregon, warns that the Senate health reform bill would lock many workers into health plans selected by their employers, without allowing them to shop for better, cheaper plans, reports the New York Times.
His concern is shared by some Democrats and also by many Republicans, who say the bill does not do enough to let the marketplace spur competition, and he said he would continue fighting on the Senate floor to make changes to the measure. “Democrats from the president on talk about how the American people ought to have choices like a member of Congress,” Mr. Wyden said. “Now under consideration is an idea that millions and millions won’t get any choice at all, let alone what a member of Congress gets.”
- “When you think about where this is headed,” Wyden added, “you are still seeing additional patches added to the crazy quilt that is American health care.”
10/7/09
-------------------------------
Supreme Court Lets Stand $36 Million Overtime Ruling
Family Dollar Stores Inc said that the U.S. Supreme Court has decided not to hear its appeal of a $35.6 million verdict finding in favor of store managers who said they were denied overtime pay, reports Reuters. The suit alleged that Family Dollar violated the Fair Labor Standards Act (FLSA) by classifying the plaintiffs and other store managers as exempt employees who were not entitled to overtime compensation.
Family Dollar said it believed the store managers were exempt employees and that they were properly compensated. But a Tuscaloosa, Alabama, jury found in 2006 that Family Dollar should have classified the plaintiffs as hourly employees entitled to overtime pay, and the trial court entered a judgment for $35.6 million. Family Dollar appealed the ruling.
- Family Dollar said that as of May 30, it had accrued liabilities of approximately $51.2 million related to the suit.
10/6/09
-------------------------------
Higher Benefit Costs Incurred by Same-Sex Couples
Most U.S. employers do not provide health coverage to an employee's same-sex partner. But even domestic partner coverage has an added cost for same-sex couples because it is counted as taxable income, reports the New York Times.
In a "best case scenario," health coverage cost a same-sex couple $28,595 more over their lifetime, assuming both partners were eligible for employer-provided coverage. The higher-earner's employer provided domestic partner coverage, which covered her partner for five years in which she stayed at home. When she returned to work, the partner used her own employer’s insurance. Even though the couple paid nearly $29,000 more in premiums than an identical heterosexual married couple, it was cheaper than using domestic partnership coverage throughout because of the onerous tax implications.
- Employers also do not have to provide survivor pension benefits to a same-sex spouse, but many do. In a worst case, however, the higher-earning partner died first and did not work for such a company. So the surviving partner got nothing. A similarly situated heterosexual surviving spouse would receive $32,253 before dying herself several years later.
10/5/09
-------------------------------
Senate Finance OKs Upping Employee Healthy Behavior Rewards
An amendment permitting health plans to provide higher rewards for healthy behaviors—one of the few bipartisan amendments introduced during the Senate Finance Committee hearings on health care reform—passed during late evening hours on Wednesday Sept. 30, reports HealthLeaders Media.
In a 18-4 vote, the panel agreed to a provision introduced by Sen. John Ensign, R-Nev., and Sen. Thomas Carper, D-Del., that would add to the committee's bill a section to expand rewards that employers offer employees for improving their health. They called for increasing monetary rewards from 20% to 30% of the cost of an employee's coverage for participating in wellness programs. "The key to achieving savings is to provide rewards for people who engage in healthy behaviors," Ensign said.
- Both Ensign and Carper mentioned major companies—such as Safeway and Pitney-Bowes—that have used reward programs to keep their employee health care costs relatively stable. But some senators, such as Sen. John Kerry, D-Mass., objected that rewarding healthy behaviors could lead to excluding individuals from coverage because of their unhealthy behaviors.
10/2/09
-------------------------------
Federal Workers, Too, Face Big Health Care Cost Hike
Federal government employees can expect a big jump in their health-care costs in 2010, reports the Washington Post.
Employees enrolled in the Federal Employees Health Benefits Program will pay an average 8.8 percent more in health-care costs, according to figures released by the Office of Personnel Management. The increase averages $5.98 per paycheck for individual health-care coverage, and a $12.87 increase for employees whose plans cover families, the OPM said.
- The increase compares with a 7.9 percent jump in 2009 and a 2.9 percent increase in 2008, according to the OPM.
10/1/09
-------------------------------
When HR Asks About Health
Anxious employees may be reassured by the information in this Money Magazine column, which advises them "Don't be surprised if, as open enrollment approaches, your HR department asks you to fill out an online questionnaire covering everything from how often you hit the gym to how often you feel sad." Additional advice:
- "In some (but not all) cases, it could be illegal for the company that collects your info to share it with your employer. Experts say it's unlikely anyway -- people would soon stop filling out questionnaires if they weren't kept private. So you need not lose sleep worrying that a manager will find out how many drinks you have per week, says Lewis Maltby of the National Workrights Institute."
- "Not convinced? Maybe you think you'll fudge the truth? Don't. That's fraud, and could be grounds for dismissal. In most cases you don't stand to lose anything by completing the survey honestly. And it may just direct you toward help you need."
9/30/09
-------------------------------
Recession Widens Income Gap
The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans, reports the Associated Press.
The wealthiest 10 percent of Americans — those making more than $138,000 each year — earned 11.4 times the earnings of those living near or below the poverty line in 2008, according to newly released census figures. That ratio was an increase from 11.2 in 2007.
- Income at the top 5 percent of households — those making $180,000 or more — was 3.58 times the median income, the highest since 2006.
9/29/09
-------------------------------
Overtime = Overweight?
As more Americans are working longer hours, half of all U.S. employees haven't exercised in the past 30 days and obesity levels are climbing, reports McClatchy Newspapers.
The economic downturn has exacerbated the obesity epidemic: Workers are putting in longer hours, afraid of losing their jobs. With less time to exercise, more than a third of employees report that work drains them of energy, leaving nothing for their personal lives. At the same time, pay cuts and rising food prices, particularly for more nutritious foods, are making fast food and vending machines a quick and cheaper option during a lunch break.
- Even with more companies offering wellness programs, something is going wrong. The Families and Work Institute report shows a significant decline in the number of employees who say their overall health is excellent, even as more employers realize that workers' health and well being affects their bottom line in lost productivity and higher insurance premiums (obesity is associated with a 36 percent increase in spending on health care services).
9/29/09
-------------------------------
Reform Mandates Could Increase Premium Costs
The House and Senate health care reform bills would prohibit insurance companies from denying coverage to people with pre-existing medical conditions and from limiting payments to sick beneficiaries, moves that many expect to increase premium costs, reports the Los Angeles Times.
That could mean bigger bills for people who get benefits through work as well as for their employers. "I don't think there is any degree of confidence that our costs won't continue to go up," said Keith Ashmus, chairman of the National Small Business Association.
- "You can't restrain premiums unless you restrain medical costs," said Karen Ignagni, president of America's Health Insurance Plans, on the industry's view of the problem. "So far, members of Congress have been allergic to that."
(On a related topic, view the SHRM Online article U.S. Employers: 'We'll Pass Along Health Reform's Added Costs.')
9/28/09
-------------------------------
Boeing to Stop Paying for Some Employees' Education
Until now, when a Boeing employee enrolled for any class at any accredited college, the company picked up the tuition — with no restrictions. But many of those enjoying free classes will lose that benefit at year-end, when Boeing starts limiting its subsidy to cover only courses that further an employee's career at the company, reports the Seattle Times.
Boeing spokeswoman Karen Forte said the company's support for employees' continuing education previously was almost unlimited. "It was pretty much an open-checkbook program," she said. There was no requirement to stay with the company after finishing the coursework, no limit on what kind of classes were covered.
- From October, Boeing will pay for new enrollments only in courses deemed "strategic" to its business. the changes to the program affect only salaried, non-union employees. However, Forte said Boeing is currently talking to its unions about having similar changes apply to their members.
9/28/09
-------------------------------
How Supermarket Group Ahold USA Simplified Its 401(k)
Charlie Claudio, pension manager at supermarket group Ahold USA, discusses how his company simplified its 401(k) structure to offer three tiers: 1) custom target-date funds that serve as the default investment, 2) a limited core of six funds (reduced from 15) for those who want to create their own asset-class allocation mix, and (3) a full brokerage window for sophisticated investors, in an interview with PIMCO DC Dialogue.
The "core" tier consists of just a money market fund, a core bond fund, two large-cap stock funds (one tracking the S&P 500 index), a small/midcap fund (tracking the Russell 2500 index), and an international equity fund (tracking the MSCI EAFE index).
- The plan sponsor also provides a basic safe harbor 3.5% effective match—100% on the first 1% of salary contributed by the employee, and then 50 cents on the dollar for the next 5% contributed. In addition, the plan auto-enrolls new hires at 3% of pay and escalates in 1% increments up to 6% over three years.
9/25/09
-------------------------------
Health Reform Bill Would Curb Flexible Spending Accounts
The health care bill proposed last week by the Senate Finance Committee would pare tax-advantaged flexible spending accounts (FSAs), reports USA Today, limiting FSA contributions to $2,000 a year beginning in 2013, with no adjustment for inflation. Currently, limits on contributions to FSAs are set by individual employers.
The reform bill would also limit the use of the benefit for over-the-counter medications without a doctor’s prescription, and include FSAs together with major medical plans in an excise tax on high-cost insurance plans. "The Finance Committee presumably decided that the revenue loss from FSAs is large in relation to the good it does," says Paul Ginsburg, president of the Center for Studying Health System Change.
- Some reform proponents claim that FSAs predominantly benefit high-income workers, but according to a statement by the Employers Council on Flexible Compensation, most FSA participants are middle income, earning approximately $55,000 annually.
9/23/09
-------------------------------
Tax on 'Cadillac' Health Plans May Also Hit the Chevys
Under the Senate health reform proposal, insurers selling a plan costing more than $8,000 for an individual and $21,000 for a family would have to pay a 35 percent excise tax on the excess amount, reports the New York Times. Although the national average premium is currently $13,375 for a family policy, according to the Kaiser Family Foundation, many are much higher than that — particularly in high-cost parts of the country.
Nationwide, about one in 10 family insurance plans would be subject to the new excise tax, according to the Center on Budget and Policy Priorities, a liberal-leaning policy and research group. The tax would be levied on insurers — or on employers that act as their own insurers. Either way, the tax would very likely be passed along to workers in even higher premiums than they pay now.
- If insurance premiums continue to rise faster than inflation, as they have for years, many more people’s policies could end up setting off the luxury tax in coming years.
9/22/09
-------------------------------
Microsoft to Open Up Say on Pay
Software giant Microsoft announced it will allow shareholders to vote on the pay of its board members, although their votes will not be binding, reports BBC.com.
The firm said shareholders would be allowed to vote on the issue every three years, starting at the 2009 annual general meeting on 19 November. Microsoft's move comes amid growing pressure in the US for firms to cut down on excessive pay deals for bosses. Politicians in Washington are looking at legislating over the issue.
- Microsoft said that while it would not be bound by any shareholder vote, if there was a significantly "negative" call, it would "consult directly with shareholders to better understand the concerns that influenced the vote."
9/21/09
-------------------------------
Federal Reserve Plans Right to Veto U.S. Bankers’ Pay
The Federal Reserve is contemplating new rules that would give the US central bank the power to veto banks’ compensation plans even if they have repaid their government bailout, reports timesonline.
as many as 6,000 banks would be required to submit compensation proposals for all employees who have responsibility for any risk-related activities.
Compensation plans that rewarded bankers for pushing into high-risk areas of business are seen as one of the major causes of the credit crunch.
- The Fed, which would compare pay practices across the banking sector, would have the power to veto banks’ remuneration plans. But it is unlikely to introduce a pay cap.
9/19/09
-------------------------------
Under Massachusetts Model, Health Costs Still Rise
Despite comprehensive health insurance reform in Massachusetts, which many see as a model for national health care reform working its way through Congress, the state’s major health insurers plan to raise premiums by about 10 percent next year, prompting many employers to reduce benefits and shift additional costs to workers, reports the Boston Globe.
Increases will range from 7 to 12 percent, capping a decade of consecutive double-digit premium increases, according to a survey of the state’s top health insurers. Actual rates for 2010 will depend on the size of the employer and the type of coverage, with small businesses and individuals expected to be hit hardest. Overall, premiums are more than twice as high as they were 10 years ago.
- "The higher insurance costs undermine a key tenet of the state’s landmark health care law passed two years ago, as well as President Obama’s effort to overhaul health care," according to the paper. "In addition to mandating insurance for most residents, the Massachusetts bill sought to rein in health care costs. With Washington looking to the Massachusetts experience, fears about higher costs have become a stumbling block to passing a national health care bill."
9/17/09
-------------------------------
401(k) Portfolios Should Take Age into Account
Investors with as few as five years until retirement can recover their 2008 losses by making modest increases in savings and working two or three more years, reports USA Today, citing a recent study by Financial Engines, a company that provides advice to retirement-plan participants.
The recession notwithstanding, many boomers are in their prime earning years, which means they should try to save as much as possible. For 2009, workers 50 and older are eligible to make catch-up contributions to their 401(k)s of an extra $5,500, for a total of $22,000.
- Young investors also have much to gain to contribution as much as they can, because they're years from retirement and are able to invest at the market's near bargain-basement prices.
9/17/09
-------------------------------
Wages Grow for Those with Jobs, New Figures Show
Wage growth has picked up in the last several months, reports the New York Times, referencing two different government surveys. Even though unemployment has reached its highest level in 26 years, most workers have received a raise over the last year.
Most companies have evidently decided that pay cuts aren’t worth the downside. Economists refer to this phenomenon as the "sticky-wage theory", and it seems to have survived the Great Recession.
- The theory holds that executives of companies don’t cut pay, even when demand for labor has fallen. They worry that employees will become less motivated or start looking for another job. So companies instead lay off workers or stop hiring. They concentrate the pain.
9/16/09
-------------------------------
Disney Confronts Union on Health Premium Sharing
A union representing some Walt Disney Co. employees has staged protests at Disneyland over health care cost sharing, reports the Los Angeles Times.
The clash pits Disney against Unite Here Local 11, an aggressive union known for its street-theater militancy. Local 11 says the company betrayed Walt Disney's family-friendly ethos by asking 2,100 employees of three hotels to pay a share of their premiums if they seek company healthcare. Disney is seeking to shift the workers into its Signature plan, in which the company pays 75% of all premiums. The rest would be deducted from employees' paychecks. The plan, says Disney, more accurately reflects the health care cost-sharing prevalent in the workplace.
- "Disney is a big enough and rich enough company to afford to pay for our coverage," said David McCluskey, a $8-an-hour waiter at Steakhouse 55, who added that he came to Disney two years ago after working in restaurants for two decades without insurance.
9/16/09
-------------------------------
Labor Dept. to Drop Bush Admin Investment Advice Rule
The U.S. Labor Department (DOL) is dropping the investment advice regulation adopted as a final rule in the waning days of the Bush administration. The rule, which the Obama administration DOL had suspended, would have allowed 401(k) participants to receive advice from financial firms that act as 401(k) plan service providers, under certain conditions, reports Dow Jones Newswires.
Some U.S. lawmakers, in particular House Education and Labor Committee Chairman George Miller, D-Calif., expressed concern that allowing plan service providers to also provide investment advice could led to firms recommending inappropriate, high-expense products, despite the restrictions in the regulations and in the Pension Protection Act. Such opposition prompted the Obama administration earlier this year to postpone when the investment advice rule would take effect.
Looking ahead, the DOL actions reflect the Obama administration's intention to take a fresh look at a range of matters, including conflicted investment advice, said Marcia Wagner of the Wagner Law Group in Boston. They also auger well for independent advisers who don't sell investment products, although the cost of hiring independent advisers, as opposed to allowing advice from financial firms that act as plan service providers, is likely to raise barriers.
- Others have noted that without the specific safe harbor from liability that the final rule had provided, fewer employer/plan sponsors are likely to provide employee/participants with any investment advice at all.
(To learn more about the history of the investment advice regulations in question, see DOL Further Delays (Not So) Final Investment Advice Rule.)
9/15/09
---------------------------------------
Evaluating Target-Date Funds: Considerations
It's important to weigh the structure and quality of target-date series of funds, reports Morningstar.
One thing to consider is whether a target-date series uses a fund of funds structure, in which mutual fund providers populate their target-date funds with existing single-strategy mutual funds. Recently, some fund families have experimented by doing away with the fund of funds structure and instead hold securities directly through a master pooling arrangement.
Another question is whether a target-date series uses active or passive management to run the underlying portfolios. The current investment popularity of indexing strategies, along with the political pressure to include more indexed options within 401(k) plans, appears to be having an effect. Recently TIAA-CREF and Fidelity--two firms with existing, actively managed target-date funds--announced plans to offer fully indexed target-date series.
- The issue of the quality of the underlying funds in target-date fund portfolios will become more significant as the industry grows, and Morningstar believes the area deserves more scrutiny.
-------------------------------
Easing Small Biz Retirement Plan Costs
Cost saving tips via the Wall Street Journal include:
-
Give your plan a check-up. Figure out how much you're paying now. What are the administrative and management fees? Are they going up? How do they stack up relative to what the competition pays?
-
Look at your provider's recent performance. Few managers have returned stellar results lately, but certain management teams have performed better than others.
-
Renegotiate with current providers. To improve your chances of landing a better deal, present bids from other plan providers. If you can't wrangle a better deal, consider going elsewhere, such as to a provider with a fee structure tailored to small companies with relatively few plan assets.
-
Bundle services under one provider. You might find a better deal by looking at your other service providers. Bundling services also adds convenience.
-
Look at low-cost plans. To keep administrative fees low, set up a savings incentive match plan for employees, better known as a SIMPLE IRA. But Oct. 1 is the deadline for setting up a SIMPLE IRA, and accessing $500 in tax credits for three years to help offset the costs of starting and maintaining the plan.
9/14/09
-------------------------------
Congress Wants to Crack Down on Executive Pay
As reports the Christian Science Monitor, Rep. Barney Frank, chairman of the House Financial Services Committee, asked financial executives at a recent hearing. “If in good times you were told you weren’t going to get a bonus, what part of your job would you not do? Would you, like, leave early on Wednesday?… Why do you need to be bribed to have your interests aligned with the people who are paying your salary?”
According to analysis by the left-leaning Institute for Policy Studies, in 1965 the CEOs of major U.S. companies made 24 times an average worker’s pay. By 2004, that ratio had grown to 431 times.
A bill passed by Mr. Frank’s committee and then the entire House on July 31 aims to shrink executive pay by giving corporate shareholders a nonbinding say on pay. Another House plan would give federal regulators the power to structure compensation in financial firms so that it doesn’t encourage short-term risk-taking.
- Bailed-out corporations – from Citigroup to General Motors – also face the scrutiny of the new Washington pay czar.
9/11/09
---------------------------------------
Court: Employer Must Pay for Weight-Loss Surgery
The Indiana Court of Appeals has ruled that an employer must pay for a 340-pound employee's weight-loss surgery to ensure the success of another operation for a back injury he suffered at work — raising concern among businesses bracing for more such claims, reports the Associated Press.
The Indiana appellate decision, coupled with a recent Oregon court ruling, could make employers think twice before hiring workers with health conditions that might cost their companies thousands of dollars at a shot down the road, according to the report.
- There's actually a string of cases across the country that have reached similar conclusions," said attorney Rick Gikas, who cited cases in Ohio, California, Florida and South Dakota. The most recent was in Oregon, where the state's Supreme Court ruled Aug. 27 that the state workers' compensation insurance must pay for gastric bypass surgery to ensure that a man's knee replacement surgery was effective.
9/11/09