Author: Site Staff

Employers seeking to help their workers become more knowledgeable about defined-contribution and defined-benefit plans, how workers’ assets are protected and more may consider linking their intranets to a page on the U.S. Department of Labor’s Web site. “Frequently Asked Questions About Pension Plans and ERISA” answers basic questions about the Employee Retirement Income Security Act of 1974; explains DB, DC, 401(k) plans and others; discusses whether plans can be terminated; explains which federal agencies regulate plans; and more. The page also contains contact information for the Pension Benefit Guaranty Corp. and the DOL should employees want to find out more.

As many employers know, HIV/AIDS affects millions of workers around the world directly or indirectly. The U.S. Department of Health and Human Services and the Centers for Disease Control and Prevention offer a number of resources for employers that can help in shaping HIV/AIDS policies in the workplace.

The Manager’s Kit includes such guides as OSHA and ADA regulations, information on health insurance and more. The resources also include a history of the devastating disease, the latest developments, role-play training, “AIDS 101 Quiz” and an assessment tool so that managers and labor leaders can determine whether their workplaces have the resources they need to respond to HIV/AIDS at work. Access the site here.

Once President Barack Obama moves into the White House on January 20, we will finally get a clue as to the direction he’s taking the country.

So far, like the Rorschach test to which he has compared himself, Obama is all things to all people. He even embodies multilateralism.

He is the son of a Kenyan father, and his childhood included several years growing up in Indonesia. To a greater extent than perhaps any other U.S. president, he is the world.

But opponents of the workplace law that Obama endorsed during the campaign worry that he would move the U.S. too close to a part of the globe they say is too highly regulated and too costly a place to do business–Europe.

Most of the attention so far has been on legislation that would make it easier for workers to join unions. That bill, however, may slow down.

The so-called card-check bill is only one item on a laundry list of proposals that could gain traction quickly. The list also includes measures to mandate paid time off and to lengthen the statute of limitations on pay discrimination.

Adding to their appeal is the fact that they are budget neutral–at least as far as the federal budget is concerned. The bills require no government expenditure at a time when Washington is spending hundreds of billions of dollars to prop up the economy.

Opponents say that the measures will cost business plenty. Senate Minority Leader Mitch McConnell, R-Kentucky (who also is husband of outgoing Labor Secretary Elaine Chao), has cast the union bill as a step toward “Europeanizing America.”

Meanwhile, some countries in Europe are trying to become more like the U.S. by loosening their labor laws and reducing regulations. In France, President Nicolas Sarkozy is pushing businesses and unions to agree to a plan to open stores on Sundays.

It’s one example of Sarkozy’s effort to address stultifying French labor laws. For instance, it’s almost impossible to dismiss a worker in France on grounds of incompetence, according to John Johnson, an attorney and director of business development at Daem Partners in Paris.

Johnson practiced law in California for more than a dozen years before moving to France about nine years ago to pursue personal projects. He was certified as a lawyer in France in 2007. In California, Johnson was a plaintiff’s attorney; in France, he represents corporations. I caught up with him while he was in the U.S. for the holidays.

Although he practiced in California, the state most friendly to employees, Johnson says that its worker protections aren’t as stringent as France’s. “You could call France ‘California-plus,’ ” he says.

Sarkozy is embarking on a long journey to reinvent the French economy. “For certain cultural and historical reasons, it’s going to be difficult to adopt a completely American or Anglo-Saxon-style system,” Johnson says. “There is a kind of distrust of all that is new.”

But there are certain advantages of the French approach for employers. For instance, companies have to pay higher taxes to support the health care system. But the coverage it provides makes it more likely that employees will get medical care and less likely to miss work because of illness, according to Johnson.

“I’m not sure you can say that national insurance coverage is a drag on economic growth,” he says.

Another advantage for companies is the French legal system. Multimillion-euro damages are unheard of, and there’s pretty much no such thing as a class-action lawsuit. Companies don’t often feel compelled to settle, as Wal-Mart did in a wage-and-hour case last week–to the tune of $640 million.

Johnson doesn’t think it’s ironic that some people see the U.S. trending toward a European-style economy while Europe looks to the other side of the Atlantic–or the English Channel–for guidance. The desperate economic times call for new thinking.

“Throughout the world, different systems are being forced to do a self-analysis,” Johnson says. “Every system is looking for a solution outside the box.”

As the global economy declines, Johnson sees the need for more experimentation and less political battle. “This old-fashioned [notion] of left-right, labor-employer doesn’t work anymore,” he says. “We’re in a different place right now. Everyone’s going to have to give something up to get something. That’s consensus.”

I can’t wait to see whether stateside Republicans and Democrats demonstrate that attitude.

Making health insurance less dependent on employment could induce workers to retire earlier or change jobs more often, says a new report analyzing the implications of various health care reforms.

In its 196-page study published this month, the Congressional Budget Office analyzed the possible effects that health policy proposals might have on the federal budget, the economy, spending on health care and the number of people with health insurance. The report also attempted to predict how employers might respond to certain changes in health care policy.

While the administration of President-elect Barack Obama has made health care reform a top policy priority for 2009, Obama made a campaign promise to leave intact the employer-based system, which provides health insurance for 160 million people—75 percent of whom are not considered elderly.

Despite the promises, proposals are being considered that could change the employer-based system. The congressional report estimates the impact of changes to the employer-based system, particularly laws requiring employers to provide coverage to employees.

Such a law, known as an employer mandate, could lead workers to retire early or change jobs. It could also lead firms to hire fewer low-wage workers, since their total compensation would be greater than their value to an employer, the report says.

The Congressional Budget Office said employer-based health insurance depresses wages, since the cost of providing health insurance ultimately leaves less money for wages. American companies that provide health insurance therefore are not at a competitive disadvantage against those that do not, since the company pays for health insurance by reducing wages.

Three approaches to expanding coverage include subsidizing health insurance premiums through tax breaks or spending programs; mandating coverage by requiring individuals to obtain insurance or employers to provide it; and automatically enrolling individuals in health plans, which would be harder to accomplish in a setting other than the workplace or a government-run program.

Any of the changes could increase costs for employers, which would pass that cost on to workers through lower wages. Lower wages would ultimately mean lower tax revenue for the federal government, the report says.

Currently, money spent by employers and employees on health insurance is not taxed.

The loss to federal coffers was estimated in 2007 to be $246 billion, more than the cost of Medicaid, which totaled $195 billion that year. But forcing employers to pay taxes on health care would not necessarily mean a windfall in taxes for the federal government, the report says, since people could itemize health insurance expenses on their tax forms.

The Congressional Budget Office concedes that one option, which wasn’t discussed in the report, for subsidizing the cost of health insurance without having to change the tax code or making it easier for people to receive government-sponsored health insurance would be a federal reinsurance program. Such a program would bring premiums down by subsidizing the cost of catastrophic illness to employers.

To read the entire report, go to http://www.cbo.gov/doc.cfm?index=9924.

—Jeremy Smerd

Workforce Management’s online news feed is now available via Twitter.

 

Massachusetts residents who are not covered under a health insurance plan in 2009 face higher financial penalties under newly proposed rules.

The maximum penalty next year for those with incomes exceeding 300 percent of the federal poverty level will be $89 for each month an individual does not have coverage, or $1,068 for a full year of noncompliance, according to the guidelines proposed by the Massachusetts Department of Revenue.

In 2008, the penalty for noncompliance was $76 a month, up to a maximum of $912 a year. Penalties for those with income of up to 300 percent of the federal poverty level would remain the same as in 2008. Penalties, though, do not apply for whose income is less than 150 percent of the federal poverty level, as such individuals are eligible for free health insurance coverage with premiums completely subsidized by the state.

In addition, individuals can obtain an exemption from the penalty if they can prove that affordable health insurance coverage is not available. In 2007, though, only 1.9 percent of tax filers—roughly 76,000 adults—were uninsured and deemed by state regulators as unable to afford health insurance and exempt from the penalty, which then was only $219.

Imposing penalties on those without health insurance is a key part of the 2006 Massachusetts health care reform law, which seeks to move the state very close to universal coverage. An earlier state report found that objective has been met, with more than 97 percent of state residents now insured.

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

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Companies that rushed into China during the boom years may find it difficult amid the global downturn to extract themselves, labor law attorneys say.

“It wasn’t too long ago when the burning issue was hiring, recruiting and retention,” said Joseph Deng, a labor contract attorney with Baker & McKenzie in China. “Now it seems the No. 1 issue for many companies in China is cost cutting, termination and redundancies.”

Landmark labor laws enacted in China this year have strengthened protections for workers, including wage standards and Social Security benefits. But worker protections against employers looking to downsize their workforce may be among the most stringent, China law experts say.

Chinese labor law prohibits “at will” firing practices common in the U.S., which means employers must have a legal basis for firing any employee.

“The first thing you have to keep in mind is that employees have contracts,” Deng said. “You cannot unilaterally terminate a contract.”

Before making any layoffs, employers need to present their plans to employee-represented work councils at each company—called employee representative congresses, which are union organizations elected by employees. For employers whose workers have not organized into unions, any indication that the company intends to lay employees off could incite workers to organize.

Deng recommends that employers file a report of a strategic plan with local labor bureaus.

“They don’t approve a plan, but they play an important role in providing guidance,” he said.

Firing workers remains something of a taboo in China, as it is in much of Asia. Employers should present layoffs as part of a strategic plan rather than a cost-cutting measure, said Baker & McKenzie attorney Guenther Heckelmann, otherwise employers open themselves up to challenges from workers regarding how companies calculate their costs.

Employers are unlikely to be able to lay off groups of workers using criteria usually reserved for firing individuals, like showing a worker is incompetent or has behaved improperly. Employers must show a change in the company’s circumstances. For example, a company’s decision to idle a plant could qualify. Employers must then attempt to find new work for the employee before giving that person 30 days’ notice of his termination.

Dan Harris, a Seattle lawyer with the firm Harris & Moure, wrote in his China Law Blog that restrictions against at-will terminations may be the most stringently enforced requirements in China’s new labor law, which took effect January 1, 2008, and was preceded by a backlash among workers to worsening working conditions in China.

Harris wrote of a client who was told by a Chinese government official in Shangdong, a coastal province southeast of Beijing, that “so long as this company did not lay off any of its approximately 250 Chinese employees, the government would look the other way regarding other labor law violations.”

The popularity of the new law has tripled the number of disputes brought by workers against their employers, said Andreas Lauffs, the Hong Kong-based head of the employment law group at Baker & McKenzie.

“There’s not a single worker that doesn’t know this law inside out,” Lauffs said.

Earlier this year, a large multinational corporation represented by Baker & McKenzie negotiated severance packages with employee-established labor unions as a precondition for laying off the workers, Lauffs said.

All unions in China are organized under the nationalized All-China Federation of Trade Unions. While striking is illegal in China, workers have been known to engage in work stoppages and slowdowns. China legal experts are watching to see whether the economic slowdown will loosen the new contract laws in China.

The Chinese economy has been growing at around 12 percent a year. Officials have worried that a lower growth rate of 8 percent is the minimum needed to forestall public unrest. For now, though, the new labor laws remain intact.

“For multinationals, if they want to downsize as a result of the current economy, they’ll have to tread very, very cautiously,” Lauffs said. “China is no longer the place where you can go and set up shop with cheap labor and no labor laws.”

—Jeremy Smerd

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Three key defined-contribution proposed regulations could be in jeopardy because the Department of Labor failed to win White House approval far enough ahead of the change in presidential administrations, pension industry lobbyists and attorneys said.

One regulation would set ground rules for providing investment advice to participants in DC plans. A second would detail the fee information that the plans are supposed to provide to plan participants, while the third would spell out the fee and compensation information that service providers have to provide to DC plan sponsors.

All three measures have been staunchly promoted by Bradford P. Campbell, assistant secretary of labor and head of the Employee Benefits Security Administration. Campbell had hoped to make the rules final before January 20, when the Obama administration will take control of the executive branch.

But none of the regulations have received final approval from the White House’s Office of Management and Budget. In a May 9 memo, Joshua B. Bolten, the president’s chief of staff, told all executive branch department and agency heads that any new regulations to be approved during the remainder of the Bush administration, “except in extraordinary circumstances,” had to be proposed by June 1, 2008, with final rules issued no later than November 1.

Lobbyists said that even if the OMB approves the regulations soon, the rules aren’t likely to become effective before the Obama administration takes over. Even if they are approved, the regulations would then be expected to be put on hold pending fresh reviews, which could result in dramatic changes.

(New federal rules usually don’t go into effect until at least 30 or 60 days after their publication in the Federal Register. In its proposals, the DOL set the effective dates for the investment advice and service provider disclosures 90 days after publication. The participant disclosure regulations were proposed to go into effect for plan years beginning on or after January 1, 2009.)

“All three rules will be scrutinized closely by a new administration as a matter of course, even if they weren’t controversial,” said Jon Breyfogle, an ERISA attorney with Groom Law Group, Washington.
Rep. George Miller, D-California, and other leading congressional Democrats have concerns with all three proposed regulations. The fee disclosure proposals have long been perceived as regulatory efforts to pre-empt further-reaching fee disclosure legislation that has been championed by Miller, who is chairman of the House Education and Labor Committee.

The DOL’s investment advice proposal also has come under fire from Miller and other leading congressional Democrats because it would dramatically open the door for mutual funds and other investment companies to offer investment advice directly to participants in defined-contribution plans.

Mutual fund companies long have been effectively barred from offering direct advice to participants because of fears that the advisors might steer participants to their companies’ own investment options.
But under the DOL’s proposal, mutual fund employees would be able to offer one-on-one advice directly, as long as the employee’s compensation doesn’t depend on the investment options selected by the participant, and the advice meets other key conditions.

The participant disclosure proposal is intended to ensure that DC plan participants are informed about investment-option fees and expenses. The service provider proposal is intended to ensure the plan sponsor has enough information to determine whether service provider fees and compensation arrangement are reasonable. Miller doesn’t believe either proposal provides sufficient information.

Of the three pending proposals, ERISA experts say the service provider one is the most likely to be approved by the OMB, because it was proposed well before the other ones and is the least controversial.

The proposals on participant disclosure and investment advice face another hurdle because they failed to meet Bush administration deadlines for publication of new regulations during the final year of the administration.

The EBSA’s investment advice rule was proposed August 22, while the participant disclosure rule was proposed July 23—and neither regulation is yet final. The service provider proposal was proposed originally by the Employee Benefits Security Administration on December 13, 2007, well ahead of the deadline.

The proposed service provider rule and the investment advice proposal were both listed as being under review on the OMB’s Web site.

“We cannot yet tell what is going to happen with final rules because we are still working on them,” Campbell said in a statement for Pensions & Investments. “With about 30 days left for OMB to process regulations in this administration, the department is hopeful our final regulations will be completed.”

Despite the missed deadlines, there’s a chance the regulations could be adopted.

“The Bolten memo set deadlines to ensure final regulations are developed in a way that preserves the integrity of the regulatory process, including adequate time for analysis, interagency consultation, public comment, and evaluation of and response to those comments,” said Abigail Tanner, an OMB spokeswoman, in an e-mail to Pensions & Investments. “The memo allows for extraordinary circumstances, which may include rules that are required by judicial decisions or statute, routine in nature, or essential operations, or occasioned by a late change in law.”

However, if the EBSA’s proposed regulations fail to win OMB approval, the dozens of comments filed in the DOL’s investment advice proceeding — and the approximately 100 comments filed in response to the agency’s participant disclosure proposal—could still prove to be helpful to Miller’s efforts to enact new DC plan fee disclosure legislation next year, pension industry lobbyists said.

“Even if the regulations aren’t issued, it doesn’t mean the whole regulatory process was in vain, because it was a tremendously educational experience that complements the legislative activity we expect next year,” said Ed Ferrigno, vice president of Washington affairs for the Profit Sharing/401(k) Council of America, Chicago.

(For more, read “A Cool Head Under Pressure.”)

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

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President George W. Bush signed into law Tuesday, December 23, a measure that relieves certain funding requirements for company pension plans.

The measure, the Worker, Retiree and Employer Recovery Act of 2008, was passed by Congress this month as part of an effort to aid employers facing large pension funding obligations due to the plunge in investment values.

The law softens funding rules that were tightened under a 2006 law that required employers to dramatically accelerate plan contributions if they missed certain funding targets.

Under the 2006 law, employers must put enough money in their plans each year so the plans will be fully funded after seven years. That 100 percent funding target is being phased in, so in 2008, plans have to fund toward a 92 percent target, while the target is 94 percent in 2009, 96 percent in 2010 and 100 percent in 2011.

If the target is missed in any year, employers then must fund toward the 100 percent target. The relief legislation removes that requirement, so that even if the funding target were missed for a year, the target for the next year would not bump up to 100 percent. For example, if an employer missed the 92 percent funding target in 2008, its funding target for 2009 still would be 94 percent.

In addition, the law suspends for 2009 requirements that retirees age 70½ or older take a minimum distribution from their defined-contribution plan.

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

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A White House bailout of General Motors and Chrysler won’t prevent the collapse of North America’s shakiest automotive suppliers, some forecasts conclude.

Domestic and import brand automakers in North America are expected to produce 2.1 million vehicles in the first quarter, according to projections by CSM Worldwide and company forecasts. That would be a 39.2 percent drop from the same period in 2008.

And many suppliers will find it hard to survive such gruesome vehicle production cuts, predicted Neil DeKoker, CEO of the Original Equipment Suppliers Association in suburban Detroit.

“We’re going to see bankruptcies like you won’t believe” he said, “even with the rescue package.”

Idle factories
Suppliers to the Detroit Three will be in the toughest shape. Detroit Three production is expected to total 1.1 million units, a precipitous 47.2 percent decline from the same period a year earlier.

DeKoker, who has worked in the auto industry for 47 years, says he has never seen a situation so dire.

Suppliers typically must operate their factories at 80 percent of capacity or better to turn a profit, DeKoker said. Early next year, suppliers will be lucky to operate at 50 to 60 percent of capacity.

“There’s no way they can be profitable under those circumstances,” he said.

DeKoker’s association is seeking federal funds for suppliers. “We’re requesting assistance from the presidential transition team,” he said.

 Lear: At ground zero
Lear Corp. is at ground zero of the disaster. The suburban Detroit seat maker relies on the Detroit Three for nearly 46 percent of sales. Lear idles seat plants whenever a customer shuts an assembly plant.

“It’s a direct hit,” said Lear spokeswoman Andrea Puchalsky. “When they close, we close.”

The company is looking at cost savings from plant utility costs to layoffs, she said. One plus is that Lear has cash. Although it burned about $17 million in the third quarter, Lear still has $523 million.

Dave Ladd, a spokesman for trim supplier International Automotive Components Group, said the company has made no decision on layoffs, but said there “could be extended shutdowns and temporary layoffs in January.” IAC operates 34 plants in North America.

IAC is a group of interiors companies purchased by investor Wilbur Ross. Despite the consolidation, interior suppliers still are being pinched by high raw material prices and big volume cuts.

Delphi Corp. is not planning any wholesale plant closings unless a plant is 95 percent dedicated to GM, spokesman Lindsey Williams said.

North America accounts for about 45 percent of Delphi’s sales, and GM makes up 22 percent of the global total.

None of Delphi’s 14 U.S. plants is shut down, said spokesman Lindsey Williams. But he said the giant parts maker, which has been in Chapter 11 since October 2005, anticipates significantly scaled-back operations and further staffing reductions at several operations as customer volumes decline.

“We are watching customer schedules,” he said. “These are very different times for us, and we have to make adjustments very rapidly.”

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

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More health plans are reducing barriers to essential treatments in response to employers’ requests, according to the 2008 findings of the National Business Coalition on Health’s eValue8 tool, which coalition members use to assess the quality of health plans as part of the request-for-proposal process.

For example, for patients with diabetes, 27 percent of health plans waive co-payments, and 33 percent reduce co-payments, for essential drugs and equipment such as blood glucose monitors. For patients with asthma, 19 percent of health plans waive co-pays for essential drugs, and 32 percent reduce them.

For patients with hypertension, 20 percent of health plans waive co-pays for drugs and equipment, and 28 percent reduce co-pays for such treatments. In the area of wellness and health promotion, 43 percent of health plans waive co-payments for preventive health care visits.

Although employers are asking health plans to provide more detailed quality information to plan members so they can make better-educated decisions regarding provider selection and treatments, only 47 percent display such quality information, and only 16 percent enable plan members to search for physicians based on quality, the eValue8 RFP tool found.

And while employers are demanding that health plans adopt electronic medical records to improve information flow and patient safety and reduce gaps in care, so far only 25 percent of health plans indicate in their provider directories whether the physicians use electronic health records, according to eValue8.

The 2008 eValue8 findings also showed health plans need to do more to ensure plan members are receiving preventive treatment such as cancer screenings. For example, only 57 percent of health plans remind members about colorectal cancer screening, and only 53 percent of health plans tell members when their colorectal screening is overdue. Moreover, only 40 percent of the plans report to physicians if their patients have received colorectal cancer screenings.

For more information on the eValue8 tool and its findings, visit www.nbch.org.

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

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