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The United Auto Workers said that it has reached a tentative new contract with General Motors and the U.S. Treasury aimed at helping the automaker restructure.

The terms include modifications to a UAW-administered retiree health trust known as a voluntary employee beneficiary association, the union said in a statement Thursday, May 21.

Terms were not released, pending a ratification vote by rank-and-file union members at GM.

The UAW agreed to the concessions as GM faces a June 1 deadline to prove its viability to the federal government or face Chapter 11 bankruptcy protection. Along with the labor concessions, GM and the U.S. Treasury also are asking GM bondholders to forgive about 90 percent of that unsecured debt.

Treasury has kept GM operating with about $15.4 billion in bailout loans.

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com

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As part of the Troubled Asset Relief Program, the Obama administration is encouraging a number of investment companies to create “bailout funds,” or mutual funds that would buy troubled mortgage securities from banks and, if all goes well, eventually sell the investments at a profit.

But retirement benefits experts warn that letting 401(k) plans allow participants to invest money in the bailout plan might not be such a good idea.

While investment managers BlackRock and Pimco have shown interest in the program, retirement benefits experts say that 401(k) plan sponsors shouldn’t necessarily jump to these products if they are made available soon.

“Plans already have too many options and too much confusion,” says Dallas Salisbury, president of the Employee Benefit Research Institute. “If I was a 401(k) plan sponsor, I would not add one.”

Given the complexity of these funds, it doesn’t make sense to offer them to the public, says Pam Hess, director of retirement research at Hewitt Associates in Lincolnshire, Illinois.

“If we take a step back and look at the current crisis, people who were experts weren’t able to assess the risks they were taking,” she says. “I’m not sure it makes sense for the average investor.”

Even if plan sponsors would consider adding these funds to their lineups, they should wait a few years until they have a performance track record, says David Wray, president of the Profit Sharing/ 401k Council of America.

“I would suspect that this program would have to be up and running at a minimum of three years, but most likely five years, for most plans to consider it,” he says.

However, some experts believe the bailout funds might turn up in 401(k) plan lineups through other investments, such as target-date or fixed-income funds, which would invest in these products.

“This type of an investment has some good diversification potential,” says Lori Lucas, executive vice president and defined-contribution practice leader at Callan Associates. “The context that you would normally see this used is as part of a target-date fund.”

Plan sponsors should talk to the portfolio managers of their plans about these funds, says Phil Suess, principal and
defined-contribution segment leader at Mercer Investment Consulting.

“It’s a fair question to ask the portfolio manager if these are securities that they would be interested in and hear them articulate the reasons they would hold them or not hold them,” he says.

A more likely scenario than bailout funds turning up in 401(k) plans would be that defined-benefit plans invest in these funds, Suess says.

“On the defined-benefit side you are seeing more plans focus on matching assets with liabilities, and that means placing a greater emphasis on bonds,” he says. “You could see these kinds of securities having a place in that.”

—Jessica Marquez

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Following months when economists kept tearing up their job-loss forecasts and revising them upward to keep pace with deteriorating economic news, the Independent Budget Office has gone in reverse.

On Wednesday, May 20, the public agency lowered its employment-loss estimate by more than 5 percent from where it stood in March, predicting the city will shed 254,500 jobs from a peak in the third quarter of 2008 through the middle of 2010.

A better-than-expected first quarter—when the city lost 25,600 jobs, including 7,800 in financial activities, and financial institutions posted surprisingly positive earnings—prompted IBO to revisit its prediction.

“We were expecting bigger losses in the financial sector than have occurred so far,” said IBO director Ronnie Lowenstein.

IBO’s revisions in financial activities were particularly steep.

The agency lowered its estimate for sector losses by 27 percent to 56,800. Losses in the all-important securities subsector are now pegged at 32,400, more than one-third lower than the figure forecast in March.

Economists have noticed the slowing pace of job decline, but they’ve had trouble explaining the good news.

“That’s the mystery,” said Marissa Di Nitale, senior economist at Moody’s Economy.com, who has revised downward by 20 percent her estimate of financial activities losses.

She says a buffer provided by federal stimulus dollars, banks taking a “wait and see” approach to layoffs, and fired workers who are still receiving severance payments (and therefore aren’t officially counted as unemployed) may be partly responsible for the good news.

Yet total losses will still be widespread.

Professional and business services, which derive much of their revenue from financial activities, will lose 67,100 jobs, or 11 percent of their employment, according to the new IBO projections. Some 28,000 construction jobs will likely disappear. And 27,500 retail jobs could go.

Three-quarters of the 254,500 jobs projected to be lost are expected to be shed by the end of September, IBO calculates. But the bottom line is the total employment decline will be greater than that of the 2001-2003 recession, when the city lost about 230,000 jobs.

Plus, even though data on the employment front is more positive, numbers on the government-budget side of the ledger remain disastrous. IBO estimates the city will face an enormous $5.6 billion budget gap in 2011—$1 billion more than Mayor Michael Bloomberg currently estimates. By 2011, the city will no longer have substantial federal stimulus dollars or an accumulated surplus to cushion the blow.

“The budget issues,” Lowenstein said, “remain daunting.”

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The first Department of Labor budget of the Obama administration places an emphasis on workplace safety enforcement and other worker protections.

In a detailed proposal announced May 7, the agency asks Congress for $1.7 billion in funding for programs designed to ensure that employees are kept safe on the job and are paid all the wages and benefits they are due. The request represents a 10 percent increase over the previous fiscal year.

The Occupational Safety and Health Administration would receive a $51 million increase in funding and hire 160 new officers. The Wage and Hour Division would get a $35 million budget increase and add 200 investigators.

In a Web video accompanying the release of the budget, Labor Secretary Hilda Solis said that cracking down on workplace violations “is a very important part of my vision.”

Overall, 670 people will be added to the enforcement staff, which Solis said will bring it to a level it has not reached since 2001.

“This is an unprecedented achievement and carries out the president’s commitment to workers for their safety, health and protection on the job,” Solis said.

Congress, which is dominated by Democrats, is likely to approve the budget largely along the lines of the Obama request.

Democrats on Capitol Hill also are enthusiastic about strengthening OSHA.

Rep. Lynn Woolsey, D-California and chair of the workforce protections subcommittee of the House Education and Labor Committee, introduced a bill in April that would allow workers and families to be more involved in OSHA investigations.

The Protecting America’s Workers Act would extend OSHA coverage to more workers, increase civil penalties for safety violations and index them to inflation.

In addition, the measure would allow felony prosecution of employers and their corporate officers who commit willful violations that result in worker death or serious injury.

House Republicans said they favor improving workplace safety but that increasing penalties was the wrong answer because current regulations are complex and confusing.

In emotional testimony before the House workforce protections subcommittee, Rebecca Foster testified that an Arkansas sawmill was fined $2,250 after it failed to put the proper safeguards on equipment that caught her stepson Jeremy’s shirt and strangled him to death.

“Did they place a value of our only son’s life at this amount [$2,250]?” she said. “It was as if OSHA had patted Deltic Timber on the back and said, ‘Good job, guys. You only killed one person.’ ”

An AFL-CIO study indicates that the average penalty for a serious OSHA infraction is less than $1,000; for a violation involving a worker’s death, it’s $11,300. In 2007, 5,657 workers died and more than 4 million were injured on the job.

The ranking Republican on the House labor committee, Rep. Howard “Buck” McKeon of California, cited positive statistics. OSHA figures show that since 2001, deaths have declined 14 percent and injuries and illness rates have fallen 21 percent.

“The mentality should be to fix things, make things better rather than trying to punish,” McKeon said.

—Mark Schoeff Jr.

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Heidrick & Struggles International Inc. announced it signed a diversity recruiting deal with the Marsh & McLennan Cos. Inc.

Heidrick will supply Marsh & McLennan with access to a range of candidates, including women, people of color, and members of the gay, lesbian, bisexual and transgender community.

In addition, the deal calls for Heidrick to give at least 10 percent of its work for Marsh & McLennan to women- and minority-owned executive search firms. Heidrick will also offer training and other services to some of the women- and minority-owned firms.

Marsh & McLennan provides insurance, risk, human capital and other services. It has annual revenue of more than $11 billion.

—Staffing Industry Analysts

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The Pension Benefit Guaranty Corp. has taken over two pension plans sponsored by Lenox Group Inc., the Eden Prairie, Minnesota-based fine china manufacturer that is in bankruptcy.

The PBGC said Tuesday, May 19, that it stepped in because the plans would be abandoned after the sale of company assets, which is intended as part of Lenox’s bankruptcy reorganization proceeding.

New York-based private investment firm Clarion Capital Partners completed the purchase of most Lenox assets in mid-March after an auction in February.

The two plans taken over by the PBGC have combined assets of $70 million and liabilities of $200 million.

The PBGC said it expects to cover $128 million of the $130 million funding shortfall. Both plans were frozen on January 1, 2007, and have about 4,300 participants.

The loss is the PBGC’s biggest since April 2007, when the agency took over a pension plan sponsored by bankrupt auto parts manufacturer Collins & Aikman Corp. of Southfield, Michigan. At the time, the PBGC estimated it would be responsible for $161 million of the plan’s $181 million in unfunded liabilities.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Despite a landmark report a decade ago detailing the deadly nature of the U.S. health system, a consumer group said Tuesday, May 19, that little has been done to prevent the errors that still kill as many as 100,000 patients each year—a number that the group said is a conservative estimate.

Consumers Union, which publishes the magazine Consumer Reports, published what it called a “review of the scant evidence” of the health system’s efforts to reduce preventable errors that cost the country $17 billion to $29 billion annually, a cost borne by the employers that pay for shoddy care.

The group concluded that it was impossible to gauge what, if any, progress had been made since the Institute of Medicine released its 1999 report “To Err Is Human.” Efforts to reform the system are “few and fragmented” with the exception of a few state laws requiring hospitals to provide information.

“In this report we give the country a failing grade on progress on select recommendations we believe necessary to create a health care system free of preventable medical harm,” the group said.

The report follows a similar analysis by the Leapfrog Group, an employer-sponsored organization working toward reducing medical errors. In a report last month, the group said a majority of hospitals failed to meet quality standards that reduce errors.

For example, 75 percent of hospitals do not fully meet the standards for 13 evidence-based safety practices, ranging from hand-washing to competency of the nursing staff, the Leapfrog Group said.

At the time, the 1999 report by the Institute of Medicine sent shockwaves through the medical establishment. The IOM, one of the National Academies of Sciences that advise U.S. policymakers, concluded that it would be “irresponsible to expect anything less than a 50 percent reduction in errors over five years.”

The report was followed by a task force appointed by President Bill Clinton, a $50 million allocation to the Agency for Healthcare Research and Quality and several federal bills. Yet today, Congress has yet to pass a bill requiring hospitals to report medical errors.

In its report Tuesday, Consumers Union said the country has failed to:

● Reduce medication errors because hospitals have not widely adopted computerized prescribing and dispensing systems; the FDA has not done enough to help consumers and health practitioners avoid medication errors that stem from similar-sounding drug names and labels.

● Establish a national system suitable for reporting and tracking medical errors.

● Empower the Agency for Health Research and Quality to track national progress on patient safety.

● Raise professional standards and accountability of doctors, nurses and hospitals that commit preventable and widespread medical errors.

The 10-year anniversary of the IOM report comes amid the first concrete efforts to overhaul the health care system led by the Obama administration, which set aside billions of dollars in the federal budget for that task.

Additionally, the administration earmarked $19 billion in the economic stimulus bill to create a health information technology infrastructure that it says will reduce medication prescribing errors and other health system inefficiencies.

—Jeremy Smerd

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The Internal Revenue Service is taking steps to ease financial pressures on companies that make automatic 401(k) plan contributions under a safe harbor provision that allows them to avoid nondiscrimination testing.

In a proposal published Monday, the IRS said that employers that automatically contribute the equivalent of 3 percent of employees’ pay to workers’ 401(k) plan accounts—to avoid nondiscrimination tests—could suspend those contributions if they incur a substantial business hardship.

Employers, though, would have to meet numerous criteria set by the IRS, including ensuring that their 401(k) plan passes the nondiscrimination test.

Under federal law, employers do not have to run an IRS nondiscrimination test—used to determine whether average salary deferrals of higher-paid employees exceed those of rank-and-file employees by a legally set amount—if their plans qualify for certain safe harbors.

To qualify for one safe harbor, an employer has to match 100 percent of employees’ deferrals up to the first 3 percent of pay and match 50 percent of deferrals made on the next 2 percent of pay.

Employers that automatically enroll employees in 401(k) plans also are exempt from nondiscrimination testing if they fully match employees’ salary deferrals on the first 1 percent of pay and 50 percent of deferrals on the next 5 percent of pay.

The rule the IRS published Monday, May 18, would affect safe harbor provisions for employers that automatically contribute an amount equal to at least 3 percent of pay into employees’ 401(k) plans.

Previously, the IRS allowed employers that qualified for the matching safe harbor to suspend the contribution if they incurred a substantial business hardship. The latest proposal would extend that relief to employers that qualify for the safe harbor through automatic employer contributions.

If adopted, the rule, published in the May 18 issue of the Federal Register, would apply to plan years beginning after December 31, 2009.

Benefits experts welcomed the proposed change.

“Companies that are really suffering right now will be more likely to be able to keep their plans,” said Anne Waidemann, a director with PricewaterhouseCoopers in Washington.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Dear Over Your Head:

Before tackling this assignment, have a serious sit-down with the company head.

Two questions jump out immediately: 1) Why is the head of the company accepting the CEO’s dysfunctional behavior and 2) Why is he not the one leading the counseling session? We can speculate on the motives, and again two stand out: 1) Your top leader is confrontation-averse and 2) He and the CEO are buddies.

Another question comes to mind: What is your relationship with the company head? Do you have enough experience to judge his integrity? This is vital as you must obtain substantive assurance (perhaps in writing) that the company head (or the board of directors) will give you protection from any retaliatory behavior by the CEO. (Is the company head aware of how far this CEO has taken retaliation when feeling threatened?)

The company head and company board must understand that employee discontent with treatment from a specific manager or supervisor is the biggest cause of employees leaving a company. That is, profits probably won’t stay up if morale stays low and people eventually change ships, which is what they will likely do once the economic climate starts to improve.

Finally, I would obtain buy-in from the company head for some executive/communications/diversity coaching for the CEO.

Assuming you get satisfactory assurance (and if you don’t then I would think twice about meeting with the CEO alone; I might opt instead for a three-way meeting with the CEO and the company head) then consider these steps:

Challenge and reassure the CEO. If possible, have the CEO meet in your office. Psychologically this will be self-empowering. Let the CEO know that the head of the company strongly suggested the meeting. Then inform the CEO that you and the company head (there is strength in numbers) value his contributions to the company success (note specific strengths). Also, share that you appreciate how, as a leader, he wants to hold people accountable, and you understand his frustration when people do not meet company performance expectations.

However, you and the company head both are concerned that some of the CEO’s actions are hurting his status as leader and potentially are hurting the overall position of the company.

Be specific. Ask the CEO if he recalls imparting any insulting or racist comments in e-mails? If he denies the deed, if at all possible be prepared to present such e-mails or have some documentation at hand. (I would not bring up your experience with the CEO in this meeting. Don’t give the CEO ammo to question your objectivity.) Let the CEO know he is putting himself and the company in legal jeopardy with such insults and racist comments.

Ask for feedback and have a plan. How does the CEO respond to your constructive confrontation? If he is defensive or in denial, then you have to let him know that you will be reporting this fact back to the company head. If he is open to your comments, solicit his ideas on how he can express his frustrations or concerns with people or business operations in a more constructive and substantive manner. I would also let the CEO know that the company is prepared to provide voluntary executive/communication/diversity coaching (and will make it mandatory) if problems persist.

Follow up on the meeting. I would schedule a three-way meeting with the CEO and company head to make sure everyone is on the same page, after you’ve had a report back with the company head. And then have a follow-up meeting in two to four weeks with you and the CEO to monitor progress.

If you follow these steps, I believe you will demonstrate your professionalism and will determine whether the CEO’s behaviors are amenable to change. And if the CEO resists this intervention, then the ball is in the company head/company board’s court, where it belonged all along.

SOURCE: Mark Gorkin, “The Stress Doc,” Washington, April 29, 2009

 

LEARN MORE: “HR Feedback for Your Boss” contains additional advice.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

We may be in a recession, but this year’s batch of interns at advertising agency Crispin Porter & Bogusky will be getting fatter paychecks.

Not that the agency itself will be funding the pay increases for the 40 young talents who will slog away in its Miami and Boulder, Colorado, offices on accounts such as “Guitar Hero” and Burger King.

Rather, Crispin has launched an eBay auction for their services.

On-again, off-again Twitterer and top Crispin creative executive Alex Bogusky (whose real handle is @bogusky, not to be confused with @bogusbogusky and @bogusalex) announced the auction Tuesday, May 19, via a tweet.

The bidding began at $1 and as of this report had already climbed to $1,225, with eight days and 22 hours remaining. (That’s more than $30 for each intern.)

“The interns only make minimum wage, so we thought this would be a great way to augment that,” Bogusky said in an e-mail. “They’re excited about that.”

The winning bidder will receive a “creative presentation” developed by Crispin’s interns in a three-month period, consisting of strategies, recommended brand positioning and concepts.

What the bidder won’t get is production services or any finished advertising materials. Travel and any other out-of-pocket expenses for the interns aren’t included either.

It seems a bit counterintuitive to farm out your own talent, but Bogusky said he doesn’t really see it that way.

Each year, the interns work for Crispin clients, but a portion of their time is carved out to work on special assignments that are typically pro bono. Now they’ll just work on this instead.

“It would be great if the high bidder is a cause-related thing,” Bogusky said.

Who isn’t welcome?

The likes of Pizza Hut and Philip Morris. The fine print on the online auction page states that Crispin, which works for Domino’s, “reserves the right to decline services in the event of a conflict with any of our existing clients or for any other reason (like if you sell cigarettes) in our sole discretion.”

Filed by Rupal Parekh of Advertising Age, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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