Author: Site Staff

United Auto Workers members at a key Ford Motor Co. assembly plant have approved a new concessionary agreement by a wide margin, according to a posting Monday, March 2, on the Web site of UAW Local 900 in Wayne, Michigan.

The agreement was ratified at the suburban Detroit plant by 83 percent of voting production workers and 53 percent of skilled trades workers, the posting said. The local, representing about 3,500 workers, voted Sunday, March 1.

Top officials of Local 900 could not be reached for comment.

Ford’s axle plant in Sterling Heights, Michigan, was the first local to approve the contract Saturday. The margin of approval was 59 percent among the 2,200 workers at the suburban Detroit plant, represented by UAW Local 228.

About 42,000 UAW-represented workers at Ford’s U.S. operations have until March 9 to vote on the contract.

The new agreement calls on workers to give up lump-sum bonuses and cost-of-living raises over the next two years. It also limits overtime pay and supplemental unemployment benefits.

Ford also can use company equity instead of cash to fund half of the $13 billion the automaker owes for a UAW retiree health care trust. Skilled trades classifications will be cut from more than a dozen at some plants to only two: mechanical and electrical.

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

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An administrative assistant who had a heart attack at home after hearing her job would be terminated was entitled to accidental disability retirement benefits, the Massachusetts Supreme Court ruled.

Claire Cole, an employee of the city of Salem, Massachusetts, was at home on March 22, 2000, when she had the permanently disabling heart attack, according to a February 24 ruling in Retirement Board of Salem v. Contributory Retirement Appeal Board.

The heart attack occurred within one hour of experiencing emotional distress when a supervisor told her that her job would be cut.

Cole, who later died, did not return to work. Court records state that when Cole applied for benefits, “lengthy and tortuous administrative and judicial proceedings” ensued.

Eventually, in 2006, the Contributory Retirement Appeal Board ruled Cole’s heart attack was caused by stress due to hearing her position would be cut and that her communication with her supervisor about the termination occurred during the course of employment.

The Retirement Board of Salem appealed, arguing that Cole was ineligible because her injury did not occur during the performance of her work. But a trial court affirmed granting her benefits.

The Supreme Court upheld the trial court’s decision, finding that the benefits now belong to Cole’s estate because “benefits may permissibly be awarded only when a disabling injury is sustained during the performance of work duties and not merely as a result of being at work when injured.”

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

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Exxon Mobil Corp. is expecting to contribute $4.6 billion to its worldwide pension plans in 2009, the company said Friday, February 27.

The Irving, Texas-based company will contribute $3 billion to its U.S. plans and $1.6 billion to non-U.S. plans, according to its annual report, filed Friday with the Securities and Exchange Commission.

Last year, Exxon Mobil contributed $52 million to its U.S. plans and $956 million to its non-U.S. plans.

Fair value of the oil company’s U.S. plans was $6.6 billion as of December 31, down 37 percent for the year. Non-U.S. plans’ fair asset value was $11.3 billion at the end of 2008, down 34 percent from a year earlier.

Exxon Mobil spokesman Chris Welberry said in a phone interview that pension assets were down in line with market movements in 2008. He emphasized that all the company’s pension plans are defined benefit, and are backed up by the financial strength of the company.

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Among the most notable ideas proposed by President Barack Obama in his $3.5 trillion budget unveiled Thursday, February 26, is a big-ticket health reform plan and a proposal to require employers to automatically enroll employees in retirement accounts.

Though details remain sketchy, here’s a quick look at some of the ways employers might be affected:

Retirement
Addressing low savings rates among U.S. workers, the proposed budget states that employers that “do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account that is compatible with existing direct-deposit payroll systems.” Employees could opt out but would automatically be enrolled in a retirement account if they did nothing.

Health care
Among the bigger-ticket items is health care reform. Other than setting aside $634 billion as an initial earmark for reforming the country’s health care system, the budget proposal offers few details.

It does state that the administration’s plan would give workers the option of keeping their employer-based health plan. The proposed budget also mentions—but does not endorse or reject—other health reform ideas such as capping the tax exclusion for employer-sponsored health insurance.

Unemployment insurance
Under the heading “Extend, Expand and Reform Unemployment Insurance Benefits,” the budget proposal would curb benefits fraud that, according to the Office of Management and Budget, cost taxpayers $3.9 billion in 2008. It calls for increased “funding for program integrity” and legislative changes to reduce employer tax evasion.

Immigration
Having taken E-Verify off the table in the stimulus package, the system that checks new-hire information from I-9 forms against Social Security and Department of Homeland Security databases, is now back in the proposed budget with $110 million to expand the program.

Federal wage reporting
The budget contains a proposal to increase the frequency employers report wages to the Social Security Administration. Currently, employers report employee wages to the federal government once a year using W-2 forms. The administration says more frequent reporting would improve tax administration and make it easier to implement their proposal to institute automatic enrollment into retirement savings accounts. The administration says it will work with states so that “the overall reporting burden on employers is not increased.”

—Jeremy Smerd

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Ninety-five percent of employers say hospitals should waive all costs associated with so-called “never events,” or serious and largely preventable illnesses or injuries that occur at a hospital, a survey by the Midwest Business Group on Health has found.

While employers say never-event charges should be waived, only 68 percent of a group of health care industry stakeholders—including hospitals, public health officials, and health plan and medical providers—agree with that position, according to the survey.

Moreover, nearly all employers responding to the survey said hospitals should refrain from trying to collect payment from patients for treatment of a never event. Just 70 percent of health care industry stakeholders agreed.

Despite the stance, few, if any, employers are enforcing a never-event policy, said Larry Boress, president and CEO of the Chicago-based health care coalition. The primary reason is a concern that their employees might be billed for the balance of the charges, he said.

Other survey findings include:

• Sixty-two percent of employers said they or their health plans should reimburse hospitals for treatment of conditions that the patient contracted after hospital admission if the hospital is not at fault, compared with 52 percent of health care industry stakeholders.

• Thirty-six percent of employers said they or their health plans should pay for never events, compared with 35 percent of health care industry stakeholders.

• Seventy-seven percent of employers said their health plans should adopt a nonpayment policy for hospital-acquired conditions similar to that used by the Center for Medicare and Medicaid Services, compared with 59 percent of health care industry stakeholders.

• Ninety-one percent of employers said hospitals should apologize to the patient in the event of a serious medical error or hospital-acquired condition, compared with 83 percent of health care stakeholders.

The survey was conducted as part of the Midwest Business Group on Health’s hospital performance and public reporting efforts. The survey that was conducted this month included responses from 50 employer members of the coalition and 110 health care industry stakeholders.

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

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The growth in national health care spending is projected to slow in 2009 compared with 2008, but it will still continue to outpace growth in the economy because of the recession, the Centers for Medicare & Medicaid Services estimates in a new report.

The study, which projects national health care spending trends through 2018, also estimates that health care spending would have reached $2.4 trillion by 2008.

Growth rates for health care spending are projected to remain steady at 6.1 percent in 2008, the same rate as in 2007, and then slow to 5.5 percent in 2009.

Despite the slowdown, however, health care’s share of the economy in 2009 will experience its largest one-year increase ever recorded, from 16.6 percent in 2008 to 17.6 percent, according to the report.

By 2018, health care spending is projected to reach $4.4 trillion and consume 20.3 percent of the gross domestic product, according to the CMS analysis.

In other trends, growth in spending on hospital care is expected to slow to 5.7 percent in 2009 from 7.2 percent in 2008, as a result of slower private spending growth for hospital care.

During the next 10 years, spending on hospital care is expected to reach nearly $1.4 trillion, up from a projected $746.4 billion in 2008.

The growth in spending on physicians also is expected to slow.

Growth in spending among public payers is expected to accelerate from 6.4 percent in 2007, or $1 trillion total, to 7.4 percent, or $1.2 trillion total, in 2009, driven largely by faster growth in Medicaid enrollment and spending.

By comparison, growth in private health spending is expected to fall to a 15-year low of 3.9 percent in 2009, when such spending will reach $1.3 trillion, as a result of slower income growth and an expected decline in private health insurance coverage.

The CMS predicts the growth rate in national health spending will rise again in 2011 as economic conditions improve and as growth in public and private health spending rebounds. Projections reflect current law and do not take into account any recent legislation including the stimulus package signed last week, CMS officials told reporters.

Filed by Jennifer Lubell of Modern Health Care, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The chairman of the Senate Aging Committee, Herb Kohl, D-Wisconsin, has asked the Department of Labor to establish rules and regulations governing the composition and advertising of target-date retirement funds.

In a letter Tuesday, February 24, to Hilda Solis, who has been confirmed as labor secretary, Kohl said different target-date funds—approved by the Labor Department as a qualified default investment alternative for defined-contribution plans—had significantly different asset allocations that could expose investors to excessively high risk.

“According to the Dow Jones Target Portfolio Indexes, a firm’s asset class allocation for 2010 target date funds’ equity should be around 27% in equities,” Kohl wrote as an example. “Despite this, a number of large investment firms have equity holdings well over 50%, exposing employees to excessive risk and ultimately, huge financial losses.

“These products are designed to automatically reallocate funds over time from equities toward fixed income and cash so that, when a person reaches their retirement age, the majority of their investments are no longer in equities. Yet, one 2010 target-date retirement fund with such holdings lost over 40% in 2008. A loss of this magnitude simply should not occur in a financial product that was designed and is specifically advertised to limit risk and volatility as one nears retirement,” Kohl wrote.

In a separate letter Tuesday, Kohl also asked Securities and Exchange Commission Chairman Mary Schapiro to look at the underlying composition of the funds and how the asset allocations are disclosed.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Defined-contribution plan participants with higher account balances have been hit hard by the market crisis, as have those near retirement age with high equity exposure, according to an Employee Benefit Research Institute study.

Those 401(k) participants with more than $200,000 in account balances had an average loss of more than 25 percent from January 1, 2008, to January 20, 2009, while those with less than $10,000 had an average growth of 40 percent, as equity losses were more than offset by contributions, according to the analysis.

Also, EBRI said, nearly 25 percent of plan participants 56 to 65 years old had more than 90 percent of their account balances in equities at year-end 2007 and more than 40 percent had more than 70 percent.

“Had all 401(k) participants been in the average target-date fund at the end of 2007, 40 percent of the participants would have had at least a 20 percent decrease in their equity concentrations, and consequently, might have mitigated their losses, sometimes to an appreciable extent,” EBRI said in a news release accompanying the study.

In terms of recovering losses experienced in 2008, the analysis noted that at a 5 percent equity rate of return assumption, employees with the longest tenure at their current employer would need about two years to recover their losses. If the equity rate of return is lowered to zero, the time to replace losses sustained rises to 2½ years.

The EBRI analysis used a database of more than 21 million 401(k) participants.

Filed by John D’Antona Jr. of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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Delphi, the largest auto parts supplier to General Motors, convinced a federal court that the success of its bankruptcy reorganization depended on terminating health benefits for thousands of white-collar retirees.

About 15,000 retirees will lose their health benefits as soon as March 31.

The company will also be allowed to eliminate retiree health care for all current and future salaried employees.

U.S. Bankruptcy Judge Robert D. Drain approved the request at a New York hearing Tuesday, February 24, over the objections of about 1,600 retirees who held that the company didn’t have the right to unilaterally eliminate their health benefits.

The benefits that will be terminated include health reimbursement accounts for Medicare-eligible retirees and their spouses and a 1 percent contribution to a retiree savings plan for active workers hired between January 1, 1993, and the end of 2000. The company will also end post-retirement basic life insurance benefits for current and future retirees.

The court said Delphi, in terminating the benefits, was making a “reasonable business judgment.”

Eliminating these benefits is estimated to save Delphi $70 million annually, or $200 million from April 2009 until the end of 2011. Terminating retiree health benefits also removes $1.1 billion from the company’s balance sheet.

Retiree health care costs have burdened the struggling auto industry. In recent years, the Detroit Three automakers have eliminated defined health benefits for white-collar retirees.

Last summer, GM announced it would no longer provide health care benefits to white-collar retirees 65 or older, instead providing a slight increase in pension payments to help cover the cost of supplemental Medicare plans. Ford has made its white-collar retirees pay more for medical benefits. Chrysler eliminated medical benefits for its retired salaried workers in 2006.

Union retirees have retained their health benefits, but that could change depending on the ability of automakers to weather the recession.

The United Auto Workers said this week it had renegotiated the terms of its retiree health care with Ford, allowing the company to fund the plan with stock instead of cash. Both GM and Chrysler are expected to strike similar deals.

—Jeremy Smerd

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