SHRM Compensation & Benefits Newswire 

 

 Daily Compensation & Benefits Newswire

  News To Use

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For links/summaries to some of the best external compensation/benefits stories on the web, see below.

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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Wages Tumble Toward 18-Year Low

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

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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 

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'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

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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

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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.

10/14/09

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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 

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

9/15/09

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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

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Congress Want 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

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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

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Assertions Examined on Health Care Reform

An analysis in the New York Times looks at President Obama's assertion that “if you are among the hundreds of millions of Americans who already have health insurance” through an employer or the government “nothing in our plan requires you to change what you have.”

According to the analysis: "That is technically true. But there is a real possibility that existing policies could change as a result of the legislation. The government, for instance, would set new standards, and employers that already offer insurance would have to bring their plans into compliance. Some existing policies might not be sustainable given the new requirements. Doctors, for example, could end up refusing to accept insurance plans patients now use."

• Others have pointed out that, with a "play or pay" mandate, employers who currently provide insurance could stop doing so and instead pay into a fund that would offer coverage to workers through a "public" option—which would certainly "change" the insurance that their employees receive.

9/11/09

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PBGC Announces Electronic Filing Webcasts

The Pension Benefit Guaranty Corporation is offering free webcasts on Sept. 23 and Sept. 30 on electronic premium filing with the agency's e-filing application called My Plan Administration Account (My PAA).

During each webcast PBGC will describe the three premium e-filing methods and focus on using My PAA's data entry and editing screens to prepare, e-sign, pay, and submit a comprehensive filing to the agency.

• You can find more information on these webcasts on PBGC's website.

9/10/09

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Participants Sit Tight in 401(k)s

Among the more than three million 401(k) participants served by Vanguard Group, 17% were 100% in stocks in 2007; at year-end 2008, 16% still were. Of the 11.2 million participants served by Fidelity Investments, 15% still have every penny in their 401(k) invested in stocks, including 14% of those between the ages of 60 and 64, reports the Wall Street Journal.

At Vanguard, only 16% of 401(k) participants made any trades in 2008, barely up from 15% in 2007 and down from 20% in 2004. That includes rebalancing across funds to restore an asset mix to target levels.

• "It is kind of striking," says Stephen Utkus of the Vanguard Center for Retirement Research. "We had the most drastic market decline since the Depression, we nearly had a total collapse of the global financial system, and all that caused most people not to do much at all."

9/10/09

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Dental Problems Common Cause of ER Visits

Dental visits are the fifth-most-common reason for a visit to the University of Virginia Medical Center in Charlottesville, Va., reports USA Today.

• A patient relates, "My dentist is on vacation. ... They told me if it got too bad to come up to the emergency room. It just got too bad, so I came up here. ..."

9/9/10 

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Chronic Conditions Crank Up Health Care Costs

Nearly half of Americans have a chronic condition, and 75% of the $2.6 trillion spent annually on health care goes to treat patients with long-term health problems, says Kenneth Thorpe, a professor at Atlanta's Emory University, reports USA Today.

• "'All of these diseases are accumulations of what's happened before in a person's life," says Barbara Starfield, professor of public policy at Johns Hopkins University in Baltimore. 'We have to think about keeping people as healthy as possible so they don't get these diseases."

9/9/09

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401(k) Fee Follies

"Unfortunately for the millions of Americans who are counting on [their 401(k)] accounts to fund their retirements, 401(k) plan fees are often absurdly high and next to impossible to uncover," reports Forbes.

"Often, human resources executives are as ignorant about the true costs of 401(k) plans as rank-and-file workers. High, poorly disclosed fees are an especially big problem among smaller companies," according to Forbes.

• "Company-wide administrative expenses appear in the plan's annual report. You can ask your employer how that charge is divvied up among your employer and fellow workers. There's a good chance your human resources department won't be able to tell you and will instead refer you to your plan's outside administrator, who will probably defer to the annual report," Forbes relates.

9/8/09

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Employer-Based Health Plan Premiums Vary Widely by State

A new set of tables from the federal government shows a wide state-by-state variation in what Americans paid in premiums for employer-based health coverage in 2008, reports HealthLeaders Media. Large variations were also found in the share paid by the employer vs. the share paid by the employee.

Workers with families in Alaska were covered by health plans costing on average $13,383 a year, while $3,248 was paid by the employee and $10,135 paid by the employer. In contrast, a worker with a family in Alabama was covered by health plans costing on average $11,119, and the employee's share was $3,265 while the employer's cost was $7,855."

• "If you look at where the premiums are most expensive, it's usually in those areas where the housing costs and wages are higher," says Jim Branscome, statistician and project manager for the Agency for Health Research and Quality. "A lot of healthcare premium costs are driven by what it costs a hospital to operate in New York, for example, versus the Midwest."

9/4/09

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Index Funds Gain Ground with Plan Sponsors

A growing number of retirement plan sponsors are choosing to make index funds the core of their plans’ investment lineups, reports Vanguard Investments, citing a Hewitt Associates study showing that of about 150 U.S. employers, 17% were likely to substitute index funds for some or all of their actively managed investment options in their plans this year -- an 8% jump from a year earlier.

While some plans are offering additional index investment options, others are replacing actively managed  funds with an exclusive lineup of broadly diversified, low-cost index funds.

• While actively managed funds often play an important role in a plan’s investment offerings, index funds can be a wise choice for many reasons, including their ability to simplify plan design and participant communications.

9/4/09

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Health Care Divides Small Business Community

Congressional efforts to revamp the country's healthcare system have sparked a fierce debate within the small business community, pitting owners who believe that reform would curb rising health care costs against neighbors who fear higher taxes, reports CNNMoney.com.

• Small business owners are worried about new taxes and regulations that Congress might impose on business owners who already insure themselves and their employees. Others counter that the private plans currently available to them don't provide good options.

(To learn more, see the SHRM Online viewpoint articles Health Care Reform—A Threat to Employer Health Plans? and HR's Health Care Hurdles—A First Person Account.)

9/4/09

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Cut My Pay ... Please!

With unemployment as high as 9.4 percent and job prospects scarce, job seekers are willing to accept as little as half of what they were making before, if it means finding a job, reports CNNMoney.com.

• In a recent survey, 65% of out-of-work respondents reported willingness to accept wages up to 30% lower than their previous compensation. And, 3% and 4%, respectively, said they would accept up to 40% and 50% of prior wages, according to the 2009 Annual Career Fair Survey released by Next Steps Career Solutions.

9/3/09

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Survey: Workers Strive to Get Most Out of Benefits

A new survey finds 90 percent of employees plan to keep or increase work benefits as their company's open enrollment season approaches. It's surprising because many workers have cut back much of their personal spending, reports the Associated Press.

The survey for MetLife Inc. shows more than a third of all workers say they have less money to spend this year, but just 11 percent plan on decreasing their benefits.

• Many workers consider their benefits package a centerpiece of their financial security, said Ron Leopold, vice president for MetLife's U.S. business. "They're looking to conserve and in some cases expand spending in benefits even though discretionary income is in many cases less than it was before," he said.

9/3/09

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Mental Health Parity: Are Separate Deductibles and Out-of-Pocket Maximums Allowed?

Facing the challenge of complying with the new mental health parity requirements that become effective for plan years beginning after October 3, 2009, employers and their advisers are asking whether separate deductibles and out-of-pocket maximums are allowed for mental health and substance abuse disorder benefits. With official guidance pending, the law is less than clear, reports Deloitte via Benefitslinks.com.

Clearly, there is ambiguity in the statutory language and a need for clarification, according to Deloitte. The Act requires the Secretaries of Treasury, Labor, and Health and Human Services to issue regulations no later than October 3, 2009.

• In the event the regulations adopt a more restrictive interpretation of the statute, some have suggested that they include a delayed effective date or a good faith compliance period during which the plans (and coverage) can bring their design into compliance, Deloitte observes.

(To learn more, see the SHRM Online article Employee Assistance Programs Target Mental Health Parity Costs.)

9/2/09

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Luring Spouses into Wellness Programs

It generally costs employers more to insure spouses' health than workers, concludes an analysis of 21 companies' experience by Dee W. Edington, a University of Michigan health researcher. At those companies, spouses' health-care costs averaged $3,738 annually, 9.7% more than employees', reports the Wall Street Journal.

Nearly half of U.S. employers include spouses in wellness programs, up from roughly 10% five years ago, estimates Helen Darling, head of the National Business Group on Health, which represents 280 employers. 

• Stimson Lumber Co. recently extended an insurance-premium rebate to spouses who join employees in its wellness program. People are more likely to lose weight and stop smoking when they are "making the changes with their spouses," said Heidi Pierce, Stimson's wellness coordinator. AmeriGas Propane Inc. requires spouses to be screened regularly, or lose coverage.

9/1/09

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Pension Advisers for GM Are Part of Pay Czar’s Review

Four years after she took over management of the General Motors pension plans, Nancy Everett finds herself in an unexpected controversy. The government is looking closely at the pay of all top G.M. employees after bailing out the automaker. And that includes the unit that manages the pension fund, reports the New York Times.

“Yes, the government is pouring all this money in, and it has a right, as the principal shareholder, to have a stronger say,” said Graef Crystal, a compensation consultant. But perhaps “the controls should just apply to those whose performance is measured by overall results,” he continued. “Ms. Everett runs a part of General Motors, but a part that has no correlation with the overall company.”

• Some experts say they believe that Everett's better-than-average investment returns for the GM pension plan are worth paying for. But “the government’s theory is that the rain should fall on the just and the unjust alike,” said Crystal.

9/1/09

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Lower Limits for 401(k) Contributions in 2010?

Deflation could result in 401(k) contribution limits being lowered next year-- for the first time since Congress imposed the limits in 1986, reports the Dallas Morning News. That would be bad news for workers who depend on their 401(k) plans for retirement and who max out their annual contributions to build their nest eggs and reduce their tax liability.

Contribution limits for 401(k) plans are adjusted annually, based on a complicated formula tied to the Consumer Price Index for the preceding third quarter. Thus, this quarter's CPI will be used to calculate the 2010 contribution limits. But the CPI was flat in July and, depending on how it performs in August and September, there's a chance the formula could produce lower contribution limits for 2010.

• It would then be up to the Internal Revenue Service to decide whether to keep contribution limits at 2009 levels or to lower them. A decision is due Oct. 15.

8/31/09

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Burger Chain's Helath Care Recipe: Paying More for Insurance Cuts Turnover

Going against the cost-shifting trend, four years ago, executives of Burgerville, a regional restaurant chain, agreed to pay at least 90% of health-care premiums for hourly employees who work at least 20 hours a week. Today, the executives say the unusual move has saved money by cutting turnover, boosting sales and improving productivity, reports the Wall Street Journal.

Burgerville's experience is notable for the food-service industry, where turnover is high and fewer than half of chains offer health insurance for part-time hourly employees. The chains that do offer benefits pay on average 49% of the cost for employees working at least 30 hours a week.

• Burgerville's initiative "not only improves quality of service but it saves money by not having to replace staff as frequently," said Darren Tristano, executive vice president at Technomic Inc., a Chicago consulting and research firm for the food industry.

8/31/09

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IRS Posts Reminder of COBRA Subsidy Penalty

The Internal Revenue Service issued a reminder that individuals who received the COBRA health insurance subsidy and have become eligible for other group coverage are required to notify the COBRA plan in writing that they no are longer eligible for the subsidy.

The subsidy assists laid-off workers in purchasing continued health insurance coverage through their former employers under COBRA. Employees eligible for the subsidy pay 35 percent of the premium and employers pay the remaining 65 percent. Employers are reimbursed through a federal tax credit.

• Those who do not notify the plan of the insurance change may be subject to a penalty of 110 percent of the subsidy. In addition, those who suspect someone may be receiving the subsidy after they become eligible for group coverage or Medicare can report this to the IRS by completing Form 3949-A, Information Referral, the IRS said.

8/31/09 

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The DB(k): Pension of the Future

A new option for employer sponsored retirement plans becomes available next year. The "DB(k)" offers businesses with 500 or fewer employees an opportunity to provide a strong retirement plan for their employees with fewer hassles and less financial drain than a traditional pension plan, reports Kiplinger.

The DB(k) melds a 401(k) savings plan with a small guaranteed income stream. “You take the best of the defined benefit concept and put it together with a 401(k) plan,” says Lynn Dudley, senior vice president for policy with the American Benefits Council.

• To induce employers to participate: An exemption from “top-heavy” rules, which are used to ensure that a company’s retirement plans are not unfairly skewed toward high paid workers. In addition, the paperwork burden is much lighter for a DB(k) plan than if a company operates separate pension and 401(k) plans.

8/31/09 

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Smoker's Lawsuit Against Prospective Employer Dismissed

A case involving a prospective employee who was not hired after he tested positive for nicotine will have only marginal impact on the types of wellness plan incentives employers use to encourage healthier behaviors, though it does highlight areas that require caution, reports Business Insurance.

The plaintiff charged that the company violated his right to privacy as well as the Employee Retirement Income Security Act (ERISA). But a U.S. District Court judge in Boston ruled that ERISA did not apply because the plaintiff was not yet an employee and was working only on the condition that he pass the nicotine test.

• Because the case did not involve the employee’s participation in a worksite wellness program, it is not likely to influence employers’ decision to use punitive approaches to force their employees to abandon unhealthy behaviors, benefits experts say.

(To lear more, see the SHRM Online article EEOC Provides Informal Guidance on Health Risk Assessments.)

8/13/09

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401(k) Contributions Start to Rise

A large savings plan provider says U.S. employees are beginning to put more of their faith and their paychecks into their defined contribution retirement accounts, reports USA Today.

In the second quarter 2009, more participants in Fidelity Investments defined contribution plans raised the amount they set aside—the first time that's happened in a year.

• In the three months ended June 30, 4.7% boosted their contribution, with just 3% decreasing it. The vast majority left their rates untouched in all those periods.

8/12/09

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PBMs Say Plan Sponsors Can Achieve 70%+ Generic Rates

Pharmacy benefit managers (PBMs) that have achieved generic drug fill rates of 70% or more say aggressive management tactics are not as important as a focus on educational and communication tools and an overall formulary design aimed at obtaining the lowest unit price rather than the highest rebate revenue, reports Drug Benefits News (via AISHealth.com).

One pharmacy benefit manager recommends that clients have at least a $20 differential between co-payment tier one and tier two levels.

• Generic fill rates are expected to rise because of more products coming on the market, more products going "off patent," and greater economic pressures on consumers.

(To learn more, see the SHRM Online article "Employee Cost Sharing Up in Prescription Drug Plans.")

8/12/09

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Frugality Pays with Target-Date Funds

When selecting a target-date fund, don't overlook expenses, recommends fund research site Morningstar.com

Morningstar found a dramatic range of expenses among 40 target-date fund families. The difference between the cheapest and most expensive target-date series amounted to more than 1.2% annually. "That's a huge disparity that any discerning investor (or prudent fiduciary) should closely scrutinize," according to Morningstar.

• Expenses are likely to fall as competition among target-date funds increases and companies seek new ways to keep costs down.

(To learn more, see the SHRM Online article Target-Date Funds Receive Greater Scrutiny 

8/11/09

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Executive Perks Receive Greater Scrutiny by Boards

Corporate boards are scrutinizing executive perquisites (perks) more so than ever before, according to new research by pay consultancy Hay Group, comparing 2008 and 2009 corporate proxy statements for U.S. companies.

Certain perks dropped in prevalence, with tax gross-ups declining from 54% of the sample last year to only 47%  in the current year. Further, financial planning fell from 61% to 57%, club memberships tumbled from 43% to 35%, and supplemental life dropped from 29% to 25%.

• A few perks increased in prevalence, including personal physical exams climbing from 35% last years to 38% in the current year, and chauffeurs/security drivers increasing from 14% to 16%.

8/11/09

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Chronic Illness Can Leave Workers Worried Sick

It's a common worry for workers coping with a chronic illness — the fear that frequent absences or poor performance could lead to being fired, reports the AP (via MSNBC.com)

According to the consulting firm Mercer, 78% of companies provide short-term disability while 80% offer long-term disability. Pay is often at a reduced level in either case. Short-term disability is designed for illnesses lasting between a week and five months. Benefits such as health insurance and 401(k) contributions are usually continued.

• Under long-term disability, 60% of pay is the most common level of coverage, according to the Mercer survey. Benefits are typically continued, at least for a fixed period.

(To learn more, see the SHRM Online article Short-Term Disability: Plan Design Affects Behavior, Outcomes)

8/11/09

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Hourly Workers Sue Over After-Hour Use of Cellphones, E-mail

Recent lawsuits brought under the federal Fair Labor Standards Act (FLSA) raise a question that many employees and employers have deliberated: Should hourly workers be paid for time spent responding to work calls or e-mails while off the clock?, reports the Wall Street Journal.

The federal suits highlight the legal issues sparked by the proliferation of personal technology as well as the blurring of work and free time. Last month, three current and former employees sued T-Mobile USA Inc., claiming they were required to use company-issued smart phones to respond to work messages after hours without pay. In a March suit, a former CB Richard Ellis Group Inc. maintenance worker seeks pay for time spent after hours receiving and responding to messages on a work-issued cellphone. A California appeals court recently reinstated a suit by employees of medical-technology provider Lincare Inc. seeking compensation for time spent answering customer questions by phone while on call.

• Greg Rasin, a partner at Proskauer Rose LLP, a New York business law firm, said the recession may spawn wage-and-hour disputes as employers try to do the same amount of work with fewer people.

8/10/09 

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First Swine Flu Vaccines Expected Next Month

The first vaccines to combat H1N1 swine flu should be approved and ready for use in some countries from September, according to the World Health Organization, MSNBC.com reports.

Half a dozen major pharmaceutical companies located in the United States, Europe and Australia are developing their own swine flu vaccines, which will have to be approved by drug regulatory authorities in each country where they are used. Europe and the U.S. both have fast-track approval systems to make the swine flu vaccine available before extensive safety tests are completed.

• Health officials expect swine flu to surge in the fall, with the return of the regular flu season.

8/6/09 

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Health Plans Deploy New Technologies to Detect and Thwart Fraud

Health insurers are stepping up efforts to detect fraud in light of expectations that a struggling economy could fuel more illegal schemes, reports Health Plan Week (via AISHealth.com).

Prevalent types of fraud remain “upcoding” services to get higher reimbursement and billing for services not rendered, according to major insurers’ Special Investigative Units. But anti-fraud efforts as becoming increasingly sophisticated thanks to improved technology and better outreach to management, employees, members, providers, law enforcement and other insurers.

• Insurers are becoming savvier at finding aberrant bills through the use of post-pay analyses of claims. For example, technology can be used to watch for claims that are impossible (e.g., pregnancy tests for a male) or improbable (e.g., services rendered on a national holiday).

8/5/09

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Baby Boomers Send Disability Benefit Claims on Rise

Social Security officials say they expect an even larger spike in new disability claims than they had expected, as aging, injured baby boomers tumble out of the work force and need income, reports USA Today.

Officials estimate they'll receive 3.3 million new disability claims over the next year, up from their previous estimate of 3 million projected just five months ago.

• The disability program has been the fastest rising part of Social Security, with spending on disability benefits growing at almost twice the rate of spending on retirement benefits.

8/4/09

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House Says Yea on ‘Say on Pay’

The House approved legislation Friday that would give shareholders greater say over executive pay and expand the powers of regulators to limit compensation packages that they deem improper, reports the Washington Post.

The bill also gives shareholders the right to reject a pay package, but their vote would be advisory. Corporate compensation committees, meanwhile, would have to sever ties with management.

• Some supporters say it doesn't go far enough, but opponents contend the legislation goes too far because it would draw the government too deeply into the workings of private-sector companies.

8/4/09

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Small 401(k) Plans Often Pay Big Fees

Small-business 401(k) savers]pay substantially higher retirement-plan fees on average, which reduces their investment returns, reports the Wall Street Journal.

Part of the reason small companies pay a higher percentage: They have smaller pools of participants across which to spread the fees. Smaller employers also have less leverage to negotiate lower fees with providers.

• More transparency, advocates say, should help lower the cost of running a 401(k) plan and allow businesses to more easily comparison shop. But not everyone is convinced that more disclosure will be good for small businesses. Dan Maul, a registered investment adviser who specializes in setting up small-business retirement plans, says more disclosure could lead to higher 401(k) fees overall because of the additional recordkeeping that will be required of plan sponsors and vendors.

8/4/09