Author: Site Staff

Legislation that would require that all fees be disclosed to 401(k) plan participants in simplified form is needed, most of the panelists testified at a hearing on the legislation Wednesday, April 22.

“401(k) fee disclosure reforms are long overdue,” testified Mercer Bullard, founder of Fund Democracy Inc. of Oxford, Mississippi, a mutual fund shareholder advocacy organization. He is also assistant professor of law and the University of Mississippi in Oxford.

“Under current law, figuring out your 401(k) fees is like trying to find a needle in a haystack, except the needle has been broken into three parts and has been put into three different haystacks,” Bullard said.

Investment management fees are disclosed as a percentage of assets in plan prospectuses, administrative fees are disclosed in dollar amounts in Department of Labor Form 5500, and other account fees specific to participants are on quarterly statements, he said.

The current system amounts to an “absurd patchwork of disclosure requirements,” Bullard said.

The hearing by the House Subcommittee on Health, Employment, Labor and Pensions was held to discuss legislation introduced Tuesday by Subcommittee Chairman Robert Andrews, D-New Jersey, and House Education and Labor Committee Chairman George Miller, D-California.

The subcommittee is part of the Education and Labor Committee.

Similar legislation was approved last year by the committee, and Sen. Tom Harkin, D-Iowa, announced Wednesday that he is introducing a similar bill.

Simplifying fee disclosure would allow plan participants to make better investment choices to reduce fees, which can substantially erode retirement savings during the long-term, Miller said.

In the current volatile market, “You need to be able to hold on to every dollar possible,” he said at Wednesday’s hearing.

In addition to disclosure of all fees, the bill also would require employers to offer a low-cost index investment option in order to be protected from liability.

Most of the witnesses testifying at Wednesday’s hearing supported the legislation.

“Providing plan fiduciaries and plan participants with additional targeted information about fees and expenses will promote better investment decisions and help 401(k) plans to better deliver retirement security to the American workforce,” testified Kristi Mitchem, managing director and head of U.S. Defined Contribution at Barclays Global Investors NA of San Francisco.

Republicans warned against attributing huge losses in 401(k) accounts solely to plan fees.

“We do no one a service … to suggest the cataclysmic failure in our markets are no more a function of so-called hidden fees,” said Rep. John Kline, R-Minnesota Most of the sharp drop in 401(k) assets are due to the decline in the market, he said.

Requiring that fee disclosure be standardized and broken down into broad categories will not work for all 401(k) plans, testified Larry Goldbrum, general counsel of the SPARK Institute Inc. of Simsbury, Connecticut, which represents plan service providers.

“We urge the committee to reconsider whether requiring disclosure through a one-size-fits-all solution is appropriate,” he said.

“Not all fees fit into categories,” Goldbrum said.

Filed by Sara Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Employers with employees working in San Francisco will have to pay more next year to comply with the city’s controversial health care spending law.

Beginning on January 1, employers with 100 or more employees will be required to spend $1.96 per hour per covered employee on health care, up from $1.85 in 2009, while employers with 20 to 99 employees must spend at least $1.31 per hour, up from $1.23, city officials announced Wednesday, April 22. Employers with fewer than 20 employees are exempt from the spending requirement.

That spending requirement can be satisfied in a variety of ways, including payment of employees’ health insurance premiums and contributions to health savings accounts and health reimbursement arrangements.

The spending requirement applies to employees working at least eight hours per week.

Last year, a three-judge panel of the 9th U.S. Circuit Court of Appeals unanimously ruled, in a challenge to the 2006 law filed by a San Francisco area restaurant trade group, that the ordinance was not pre-empted by the federal Employee Retirement Income Security Act.

Earlier this year, the full appeals court declined to review the panel’s decision.

The Golden Gate Restaurant Association intends to ask the U.S. Supreme Court to review the appeal panel’s ruling.

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

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With momentum building for Congress to address comprehensive immigration reform later this year, two members of the House have introduced a bill to put employment verification at the center of the debate.

Written by Reps. Gabrielle Giffords, D-Arizona, and Sam Johnson, R-Texas, the measure would establish a mandatory electronic verification system that replaces an existing government-run system that has been roundly criticized by employer groups.

Giffords and Johnson hope their bill, the New Employee Verification Act, will either be the foundation for work-site enforcement in a broader immigration bill or move through Congress on its own.

The bill was introduced Wednesday, April 22, and announced by Giffords and Johnson on Thursday, April 23. It was originally offered in the previous Congress but had to be reintroduced because it did not become law.

The legislation mandates that all employers sign up for the Electronic Employment Verification System, which is based on the new-hire system used in each state to enforce child support payments. About 90 percent of employers use the new-hire system already.

Information for recently hired employees would be checked against Social Security and Department of Homeland Security databases to determine work eligibility. The system would eliminate the I-9 immigration form. 

Alternatively, employers could register for the Secure Electronic Employment Verification System, a network of government-certified private sector companies that would authenticate a workers’ identity through a biometric identifier like a thumbprint.

The bill would establish civil and criminal penalties for employers that knowingly hire illegal immigrants.

Giffords and Johnson have been working with the HR Initiative for a Legal Workforce on the legislation. The organization is led by the Society for Human Resource Management and also includes the HR Policy Association and the National Association of Manufacturers.

The HR groups have led a charge against E-Verify, the government-run electronic verification system that is currently used on a voluntary basis by 118,917 employers.

“E-Verify’s significant error rate and reliance on paper-based identity documents often deny legal workers employment and can lead to fraud and identity theft,” the HR Initiative wrote in an April 23 letter to members of Congress. “Employers, in turn, are left vulnerable to sanctions through no fault of their own.”

E-Verify detractors say that the 4.1 percent error rate in the Social Security database could lead to millions of people being incorrectly ruled ineligible for work.

E-Verify proponents, which include many Republicans and conservative Democrats, say that the system confirms 96 percent of queries instantly and has an error rate of less than 1 percent.

Like E-Verify, the Electronic Employee Verification System would rely on the Social Security database. But the Giffords-Johnson bill requires that the Social Security information be cleaned up before the new system is launched.

In a conference call with reporters Thursday, Giffords called the proposal a “simple, effective, balanced alternative to E-Verify. It is a realistic piece of legislation.”

She also touted a provision that would establish federal pre-emption of state laws on employment verification. Her home state of Arizona was the first of several to mandate that employers use E-Verify—an experiment that is not succeeding, according to Giffords.

“Immigration is in the federal purview,” she said. “We should be dealing with it at the congressional level, not piecemeal state by state.”

It’s not yet clear when Congress will take up immigration reform. A comprehensive bill sparked political combustion in 2007 and died in the Senate. In the last couple weeks, the Obama administration has indicated it wants to address comprehensive immigration this year.

So far, individual dimensions of reform—such as verification and employment visas—have not been able to move on their own. But E-Verify is scheduled to expire on September 30, which might give work-site enforcement separate momentum.

Johnson says the electronic verification bill doesn’t have to be held up until comprehensive reform is complete.

“This year, we stand a great chance of passing it out of the House and Senate,” Johnson said. “It doesn’t have to wait. It can be combined later.”

As the immigration debate gets under way, HR organizations are trying to influence the outcome, especially on verification.

“SHRM feels strongly that employers should be part of the solution to illegal immigration,” said Mike Aitken, SHRM director of government affairs.

—Mark Schoeff Jr.

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The number of U.S. initial claims for unemployment benefits rose 4.4 percent to 640,000 in the week ended April 18 from the previous week’s revised number of 613,000, the U.S. Department of Labor reported Thursday, April 23.

The four-week moving average of claims fell 0.7 percent to 646,750 from the previous week’s unrevised average of 651,000.

Mass layoffs and their associated initial claims for unemployment benefits reached their highest levels on record in March, according to the U.S. Bureau of Labor Statistics.

The number of mass layoffs rose 85 percent year-over-year in March to 2,933, and initial unemployment claims associated with mass layoffs rose 85.4 percent to 299,388, according to seasonally adjusted numbers released Thursday by the bureau.

Temporary-help services were the industry with the highest number of initial jobless claims at 9,964 (not seasonally adjusted).

A mass-layoff action involves at least 50 workers from a single workplace.

—Staffing Industry Analysts

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Unilever’s recent decision to outsource its HR processes for its Latin America workforce to IBM signals that employers are now more likely to go to different HR business process outsourcing vendors for different parts of their business.

On Wednesday, April 22, IBM announced that it had signed an HR BPO contract to take over the HR processes for Unilever’s 27,000 employees in Latin America. Under the agreement, IBM will provide services to Unilever through its centers in Hortolandia, Brazil, and San Jose, Costa Rica.

The agreement marks a five-year extension of a current contract between Unilever Latin America and IBM by which IBM provides payroll, benefits administration, employee data management and contact centers for Unilever’s employees in Brazil Mexico And Chile, says Mary Sue Rogers, general manager Global HR and learning at IBM. It also extends that agreement to include 16 additional Latin American countries. Rogers declined to comment on the value of the contract.

The announcement about the deal had some analysts wondering if the move was a departure for Unilever, which had signed a global, seven-year HR BPO deal with Accenture in 2006. But sources say that Latin America was not part of that deal.

“When the Accenture deal came up a few years ago, there was reluctance for anyone from Unilever Latin America to abandon IBM,” said Neil McEwen, managing consultant at PA Consulting. “This deal shows that significance of such strong relationships.”

IBM also has a finance and accounting outsourcing contract with Unilever, said Phil Fersht, a research director at Boston outsourcing researcher AMR Research.

“IBM has emerged as leaders in Latin America, so this deal really makes sense,” he says.

The contract may also indicate a renewed willingness by HR BPO buyers to go to different providers for different regions, said Michel Janssen, managing director at Hackett Group, a Miami-based business process outsourcing consultant.
 
“It does show a willingness to split the work among different vendors,” he said.

Whether this will be a trend, however, remains to be seen, Janssen said.

—Jessica Marquez

General Motors, battling a 49 percent decline in U.S. sales through March, plans extended shutdowns at most of its U.S. plants this summer, news reports said.

The closings will stretch as long as nine weeks, the Associated Press reported, citing two people familiar with the plan. Bloomberg News said 15 North American assembly plants will be shuttered for at least a week from mid-May through July. Most GM factories will be down about two months instead of the typical two-week summer break, The Wall Street Journal said.

UAW plant officials say GM plant managers and human resources personnel will meet with the union on Thursday and Friday, April 24 and 25, at some factories to discuss changes in production, according to the AP.

GM spokesman Chris Lee declined to comment on that report and said the company tells workers first when production cuts are made, the AP reported.

Reduced production will help GM ease a 122-day supply of vehicles as of April 1. The industry average was 83 days following a 37 percent decline in sales in March.

The automaker is staying afloat with $13.4 billion in U.S. loans and scrambling to reach an accord with bondholders to avert a bankruptcy filing before a June 1 government deadline.

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

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Determining how much flexibility employers have to ignore hiring tests that exclude a disproportionate amount of minorities sparked a lively Supreme Court session.

In an oral argument that ran unusually long—about an hour and a half—the justices on Wednesday, April 22, parsed a case involving a decision by the city of New Haven, Connecticut, in 2003 to throw out the results of an exam that assessed firefighters for promotion to lieutenant and captain.

The New Haven Civil Service Board voted not to certify the test because 14 of the top 15 candidates were white, based on scores. The city said the test was unfair to minorities and risked putting it in violation of federal civil rights laws if no minority firefighter was elevated to a higher rank.

No promotions were approved.

That decision prompted one Hispanic and 19 white firefighters to file suit against the city, asserting that the city’s refusal to accept the test results violated their rights.

A district court dismissed the case because scuttling the exam affected everyone equally and the plaintiffs did not prove that the city committed intentional discrimination. The New York-based 2nd Circuit Court of Appeals upheld the dismissal.

Now the Supreme Court must weigh whether an employer can try to avoid a potential lawsuit over adverse impact by acting in a way that other employees allege is discriminatory toward them.

Employers are put in a bind, Justice David Souter said. If they accept a test, they are setting themselves up for a disparate impact suit. If they throw out a test, they are vulnerable to a disparate treatment suit.

“Whatever Congress wanted to attain, it couldn’t have wanted to attain that kind of a situation,” Souter said.

Justice Ruth Bader Ginsburg suggested that the multiple-choice New Haven exam may not have been designed to demonstrate who would succeed in fire department leadership positions.

But Gregory Coleman, the attorney representing Frank Ricci and the other New Haven firefighters in the suit, said the city didn’t determine that the test was flawed, only that it produced the wrong racial outcome.

“This decision is grounded in race,” Coleman said.

The court may decide to what extent a municipality, or any employer, can take steps to ensure a diverse workforce and at what point a test result can be declared discriminatory.

Justice Antonin Scalia pointed out that the disparate impact and disparate treatment clauses of the Title VII federal discrimination law can be at cross purposes.

“They become at war with one another when you say that all that is necessary to permit intentional discrimination is the employer’s good-faith belief that if he didn’t intentionally discriminate, he’d be caught in a situation of disparate impact,” Scalia said.

The attorney representing the city of New Haven argued that employers must have the latitude to remove equal opportunity barriers.

“When an employer learns that a practice has a severe adverse impact such that it creates an inference of discrimination, and evidence further supports that inference, the employer should be granted some limited degree of flexibility to act,” said Christopher Meade.

But doing so can leave another group of employees feeling as if that action prevents them from advancing.
 
Chief Justice John Roberts Jr. crystallized a key question facing the court: “How do you draw the line between race-conscious, which is permitted, and racial discrimination, which is not?”

Diversifying a city’s fire department is a sound employment practice, according to Marc Morial, president of the Urban League and former mayor of New Orleans.

“What is at stake … for municipal governments is to have the ability to have fire departments and police departments that look like the citizens they serve,” Morial said at a press conference outside the Supreme Court building following the oral argument.

Ricci and 17 colleagues who filed the suit also were present on the rain-soaked marble steps. They said they want to get the promotions that they deserve.

“If you work hard and you study and you apply yourself on the job, in America you can succeed,” Ricci said.

—Mark Schoeff Jr.

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A federal court ruled Tuesday, April 21, that FedEx Home Delivery drivers are independent contactors, not employees.

The ruling by the U.S. Court of Appeals for the District of Columbia overturned a 2007 decision by the National Labor Relations Board.

The court’s majority opinion cited drivers’ abilities to operate multiple routes, hire substitute drivers without FedEx’s permission and sell routes as well as their contract as reasons for ruling they are independent contractors.

The case stemmed from an effort by the International Brotherhood of Teamsters Local Union 25 to unionize FedEx Home Delivery drivers at two sites in Massachusetts in 2006. The union won the election, but FedEx refused to bargain with the union, saying its drivers were independent contractors. The NLRB had decided against FedEx.

FedEx Home Delivery is part of FedEx Ground, a division of FedEx Corp.

FedEx also announced April 1 that a Washington state jury ruled FedEx Ground workers were independent contractors and not employees. That lawsuit, Anfinson v. FedEx Ground Package System Inc., involved 320 workers.

However, FedEx faces other lawsuits regarding independent contractor status, including a national class-action lawsuit, and state tax proceedings, according to its most recent 10-Q filing.

—Staffing Industry Analysts

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People moving into key executive positions
	Bill Maxwell has been named senior vice president and chief human resources officer at Oakwood Worldwide. He recently served as executive vice president of global human resources at Cartus. Maxwell previously worked as vice president of worldwide household products at Black & Decker, vice president of human resources at Kwikset Corp. and director of human resources at Black & Decker Canada.
	Ann Thomas has been named vice president of human resources at SciQuest. She recently served as director of human resources at the American Institute of Certified Public Accountants. Thomas previously worked as vice president and human resources business partner for the social and statistical sciences group at RTI International and as vice president of human resources at Campbell Alliance.
	Michael Alicea has been named senior vice president of human resources in the global media client services unit at the Nielsen Co. He recently served as senior vice president of human resources for Nielsen Business Media. Alicea previously worked as vice president of human resources at Nielsen Media Research, vice president of operations at PERQ/HCI and vice president of ACNielsenHCI.
	Ford & Harrison recently made new appointments: David A. Prather has been named senior counsel in the Memphis, Tennessee, office. He rejoins the firm after serving as senior policy advisor to the administrator of the U.S. Department of Labor’s Wage and Hour Division.
	Matthew J. Rita has been named a partner in the firm’s Denver office. He recently served as a partner at Holme Roberts & Owen. He previously worked as a judicial law clerk for Chief Judge Joseph L. Tauro of the U.S. District Court in Massachusetts before entering private practice.
	Mark A. Konkel has been named as senior counsel in the firm’s New York office. He recently serves as an associate at Winston & Strawn.
	Dawn Siler-Nixon has been named diversity partner. She also chairs the firm’s diversity committee. She recently served as a partner in the Tampa, Florida, office. She previously worked as an associate at Gunster, Yoakley & Stewart.
	Pat Goepel has been named group COO at Patersons HR and Payroll Solutions. He recently served as president of Fidelity HR Services. Goepel previously worked as CEO of Advantec and as executive vice president at Ceridian.
	Bruce Kidd has been named senior vice president of middle markets at Walker Information. He recently served as director of entrepreneurship and managing director of the 21st Century Research & Technology Fund at the Indiana Economic Development Corp. Kidd previously worked as vice president of the Indiana Venture Center, manager of the Indiana Angel Investor Network (AngelNet) and founding partner at Concord Partners.
Retired U.S. Navy Rear Adm. Norton C. Joerg has been named a director in the Washington, D.C.-area advisory practice at PricewaterhouseCoopers. He previously served as a deputy judge advocate general in the U.S. Navy.
Tim Hogan has been named managing director at Boyden. He also serves as a member of the firm’s financial services and human resources practices. Hogan previously worked as global vice president of human resources at Black & Decker Corp., vice president and chief human resources officer at Zurich Commercial and vice president of international human resources at Sylvan Learning Systems.
Kristin Bass has been named senior vice president of policy at the Pharmaceutical Care Management Association. She recently served as health care advisor to Sen. Charles Grassley, R-Iowa, on the U.S. Senate Finance Committee. Bass previously worked as senior vice president for policy at the Healthcare Leadership Council, vice president of federal affairs at WellPoint and director of legislative affairs at the American Association of Health Plans (now AHIP).
Daniel E. Gold has been named vice president of human resources at Associated Estates Realty Corp. He recently served as director of corporate human resources at Falcon Transport. Gold previously worked as human resources manager at Rockwell Automation, manager of human resources and training at Venture Lighting International, senior human resources representative at Bailey Controls Co. and staffing specialist and training coordinator at Cap Gemini America.
Submit your move

Citigroup is trying to revive its fortunes by shaking up its executive team and electing new directors to its board. But critics say the moves are window dressing meant to appease the company’s largest shareholder—the U.S. government.

Despite voting Tuesday, April 21, to elect board members nominated by the company, the acrimony on display at Citigroup’s annual meeting revealed a deep skepticism and anger among investors toward the company’s new management team.

“Do you consider this to be talent?” asked one shareholder, Kenneth Steiner, referring to the board of directors. “I don’t. If it is, it’s talent I can do without.”

CEO Vikram Pandit told investors that the company has reduced its assets by $500 billion since he came on board in late 2007, and “made painful but necessary decisions” to shed 66,000 employees, or 18 percent of its workforce.

“We will repay every dollar with interest and a great rate of return for the taxpayer,” Pandit said at the meeting at a Midtown Manhattan hotel.

In recent weeks, Pandit has focused on executive-level management changes that have put relative newcomers to Citi—though in several cases old colleagues of Pandit—into positions of power.

“The changes by Pandit is a rationale to say, ‘We’ve got everything in place—that the government should take a hands off approach,’ ” said Rich Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees.

But Ferlauto said he is skeptical that Pandit, who came to the job with little institutional management experience, can turn the company around.

“In my view, Pandit is on the way out one way or another,” he said.

In recent weeks, Pandit promoted executives he worked with at Morgan Stanley and Old Lane, the hedge fund he helped found and which Citi later acquired. Observers say these changes highlight how the financial services firm has done little to manage its succession.
 
“It’s hard to believe they don’t have expertise within,” said Jeffrey Sonnenfeld, founder and president of the Chief Executive Leadership Institute at the Yale School of Management. “And it’s a shameful indictment of all financial institutions that they’ve had to turn to the outside” to fill key management positions.

Earlier this month, Pandit named Edward J. Kelly as CFO, replacing Gary Crittendon, who was named chairman of Citi Holdings Inc., a company created to include the financial services firm’s noncore businesses. The company intends to sell or find a joint-venture partner to run Citi Holdings. Crittendon became CFO in 2007.

Last year, Citi hired Paul McKinnon, a former senior vice president for human resources at Dell, to be the company’s first-ever chief talent officer. By November, with the financial crisis in full swing, McKinnon replaced Citi’s longtime head of HR, John Donnelly.

The management changes were preceded by the departure of Marty Lippert, the company’s chief information officer and chief operations and technology officer, and Anita Sands, a managing director who was head of transformation management.

Lippert and Sands joined Citi last summer. Citi says Lippert resigned, and would not respond to questions regarding Sands’ status.

“The management story of Citigroup is one of the worst in corporate American history,” said Richard Bove, an analyst with Rochdale Securities in Tampa, Florida. “They should find people within the organization to run the organization. However, the people who run Citigroup—the board of directors and the executive suite—have no confidence in the people who have been groomed and trained by Citigroup. They have no confidence in their employees.”

Jeffrey Herdan, a Citi employee of nearly 25 years who was laid off in December, attended the meeting. He criticized board chairman Richard Parsons for not addressing why the company allowed former CEO Charles Prince to walk away with a multimillion-dollar exit package when the company was on the verge of collapse. Herdan, whose comment provoked loud applause from fellow shareholders, said the company did not encourage employees to voice criticism.

“I learned how to be quiet to retain my position,” he said.

Some leadership changes at Citi, however, elicited enthusiasm. Shareholders simultaneously cheered and booed as Parsons opened the meeting by announcing the departure of longtime board members Roberto Hernandez, Kenneth Derr, Franklin Thomas and, of particular delight to investors, Sir Winn Bischoff and Robert Rubin.

As the names were read a shout came from the audience: “It’s about time!”

Parsons, widely seen as an experienced hand who knows how to finesse political minefields, responded: “I see this will be a spirited meeting.”

—Jeremy Smerd

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