Author: Site Staff

New York City’s unemployment rate fell last month with the addition of several thousand jobs, a sign that New York is fairing better than the rest of the nation, but by a limited measure.

The seasonally adjusted unemployment rate, which only accounts for those actively seeking work, dropped to 5 percent in July from 5.4 percent in June and 5.3 percent in July 2007, according to the state Department of Labor. Last month’s adjusted rate for the city was 0.7 percentage points lower than the national rate.

But the number of people collecting unemployment in the city has risen.

Despite the adjusted rate, “total unemployment has been trending upward across the board,” said Jim Brown, a state Department of Labor economist. “We’re still seeing continued weakening in the local and national economies.”

The number of people collecting unemployment throughout the five boroughs, a figure considered by many economists to give a more complete picture of the economy’s health, totaled 70,700 in July. That number is up 17 percent from 60,500 in both June 2008 and July 2007, Brown said.

Unemployment payouts usually go up in July with expected layoffs among teachers’ aides, school bus drivers and workers in several manufacturing industries, but this increase is bigger than usual, he said.

Last month, the total number of New Yorkers not working was augmented by 2,200 layoffs in the city’s financial industry, according to a report released Thursday, August 14, by Eastern Consolidated, a real estate investment firm.

But unexpected growth in other sectors, such as 1,400 jobs in construction and 3,800 jobs in the tourism industry, eased the city’s unemployment rate. More than 6,000 jobs were added in the city in July, according to the report.

“The city has been performing better than the nation in terms of employment and job creation, and it continues to do that,” said Frank Braconi, chief economist for the New York City Comptroller’s Office. “But we also have to remember that these numbers are subject to large revisions, which might bring about a sadder story.”

July’s decline in unemployment could be an anomaly, noted Kenneth Goldstein, a labor economist at the Conference Board. He projects that the city’s unemployment rate is likely to rise again over the next six to 12 months.

“The New York City job market has been affected by the same forces as the rest of the country, except that when the dollar was weak, Europeans were all over Manhattan spending money,” he said. “That premium package is losing steam as the dollar improves and Wall Street continues to struggle.”

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

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Massachusetts Gov. Deval Patrick’s administration has issued a regulation that would tighten the rules employers in the state must meet to avoid paying an assessment to the state to help provide coverage to the uninsured.

The current “fair share” contribution regulation is part of the state’s 2006 health care reform law that created a nearly universal health system in Massachusetts. The current regulation requires businesses with at least 11 full-time employees to pay a penalty if they don’t fulfill one of two requirements.

To avoid paying the $295 per-employee assessment, employers must either ensure that at least 25 percent of their full-time workforce is enrolled in their group health insurance plans or they must pay 33 percent of the premium for individual coverage for employees within 90 days of their starting work.

The proposed regulation, however, would require employers to meet both requirements to avoid the assessment. If adopted, the assessments would generate an estimated $45 million in revenue in fiscal year 2009, according to documents from the Massachusetts Division of Health Care Finance and Policy. Currently, the assessments draw about $7 million in revenue, a spokeswoman from the governor’s office said.

That revenue goes toward funding the Commonwealth Care program, which subsidizes health insurance premiums for about 175,000 previously uninsured lower-income state residents.

Employer groups had previously expressed concerns about such a change in the rules, which they say will impose a hefty financial assessment on employers, such as many retailers, that have long waiting periods before new employees are eligible for health coverage. Under current rules, many such companies are exempt from the penalty.

The regulations would go into effect October 1. A public hearing on the issue is scheduled for September 5.

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

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General Motors Corp. has launched a dependent health care audit of its 80,700 hourly workers and 345,000 retirees in an effort to reduce the more than $4.6 billion it spent on health care last year, said Michelle Bunker, a GM spokeswoman.

Bunker said the audit, which is being conducted by Highland Park, Michigan-based Budco, a benefits communications and dependent database developer, will run through 2009’s first quarter.

Initially, she said, workers and retirees would have the opportunity to self-report ineligible dependents, who will be removed from GM’s health care rolls with no repercussions.

In a second phase, to be launched this fall, employees and retirees will be asked to provide documentation—such as a tax return or school transcript—proving that their dependents are eligible for coverage. Employees may be asked to compensate GM for coverage for ineligible dependents discovered in this second phase, the spokeswoman said.

Bunker said the Detroit-based automaker has just finished an audit of its 36,600 active salaried employees and 97,400 retirees, and found the majority of ineligible dependents “were children who have aged out because they are no longer attending school.”

She declined to provide more details of that audit’s results.

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

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Chris Jurney loves his job as a senior programmer of video games with Relic Entertainment. So when he moved from Vancouver, British Columbia, to Philadelphia because of his wife’s work, he was worried that he might not be able to return to his job.

But after a stint at a sister company, Jurney was thrilled that his bosses at Relic said he could come back to work for them and telecommute from his home in Philadelphia. But as many teleworkers soon realize, working from home can quickly lose its appeal.

“I was going totally stir crazy,” Jurney says.

The 31-year-old pitched a new idea to his boss. He found a place called Independents Hall just 30 minutes from his home, where he could share office space, have his own desk, free Internet, a conference room and all the coffee he could drink for $275 a month.

Relic agreed to foot the bill in order to keep Jurney productive and happy, says Tarrnie Williams, general manager at the company.

“Chris had worked with us for a number of years, and in the video game industry it’s really hard to find truly excellent senior talent,” Williams says.

Co-working spaces have been around for a long time, but traditionally they have been the domain of entrepreneurs and freelancers. However, owners of co-working spaces say they are seeing more corporate teleworkers coming in, and in more than a few instances, they are getting their employers to foot the bill.

“We have a handful of people here who work at large companies that are far away and are paying for their employees to work here,” says Miguel McKelvey, owner of Green Desk, a co-working space in Brooklyn, New York.

Co-working is an attractive option for teleworkers in urban areas like San Francisco and New York, where employees may live in apartments that are too small for home offices, observers say.

And for employers like Relic, paying monthly fees that can range from $200 to $450 a month isn’t a huge cost, considering how hard it is to find specialists in certain fields, particularly technology, says Rose Stanley, practice leader, professional development at WorldatWork.

“Some employers may decide to subsidize part of it if it means keeping those employees,” she says.

Jurney says that co-working allows him to also brainstorm a bit with other programmers at Independents Hall—which he wouldn’t have been able to do working from home.

“It’s a pretty creative space,” he says.

To make sure that Jurney still feels connected to his colleagues at Relic, the company has placed a video camera on his old desk in Vancouver, where he works one week a month.

“So when you get in every morning, you can walk by his desk and say, ‘Hey, Chris,’ and there he is,” Williams says. “We want him to feel as included as possible.”

Whether company-paid co-working becomes a trend remains to be seen, but it’s a great thing for companies to know about, Stanley says.

“I think it will pick up as more companies become aware of this option,” she says. “It seems like these sites are popping up everywhere.”

—Jessica Marquez

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Employers with 20 or more employees in San Francisco will be required to offer commuter benefits to their workers under an ordinance passed Tuesday, August 12, by the city’s Board of Supervisors.

The ordinance gives employers three options.

They can:

• Set up a program under IRS Code 132(f) into which employees can make pretax contributions to pay for mass transit. The maximum monthly contribution set by the IRS for 2008 is $115 for a transit pass.

• Pay for employees’ transportation expenses, through such steps as buying transit passes.

• Set up a van-pooling program for employees.

The mayor has 10 days to decide whether to sign or veto the measure.

If the mayor approves it, as is expected, it will take effect 120 days later.

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

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San Francisco employers are likely to face new legislation requiring them to provide employees with the opportunity to use pretax earnings to pay for passes on public transportation.

The commuter benefits legislation is expected to be approved by the city’s Board of Supervisors this month. It is the latest in a string of mandates enacted in the past two years that include mandatory paid sick leave, an increase in the minimum wage and, this year, a requirement for employers to provide health insurance for employees or pay into a city health care fund.

“The perception of a mandate has not been helpful for us,” says Rob Black, vice president for public policy at the San Francisco Chamber of Commerce. “On the whole, we think it’s good for businesses to offer these programs, which have tax benefits to employers and employees, but because it’s a mandate it’s harder for us to get businesses to participate.”

The legislation was introduced by Supervisor Ross Mir¬karimi. If approved, it is likely that Mayor Gavin Newsom, whose Department of the Environment supports the legislation, will sign it into law.

“It’s a way to help increase public transit in San Francisco,” says Jeremy Pollock, a legislative aid for Mirkarimi. “It’s a benefit for employees that shouldn’t cost employers anything.”

The cost of administering the plan is offset because of the tax savings employers reap. By purchasing transportation passes with pretax dollars, an employee’s taxable earnings decrease, which reduces payroll taxes owed by employers.

A similar measure in New York City failed to pass in 2003.

With high gas prices and mounting environmental concerns, cities can be expected to step up their pressure on employers to help reduce congestion and pollution, says Dan Corbett, vice president for transportation development for WageWorks, a San Mateo, California, company that offers pretax benefits programs for employers.

“More places are looking at employer requirements to reduce congestion, traffic and pollution,” Corbett says.

While the city’s legislation may benefit employers, a principle may also be at stake, says Jamie Allen, a partner in the San Francisco law office of Jackson Lewis.

“The concern with this type of legislation is, here is another example of the city and county of San Francisco … not being particularly cognizant of businesses’ need to be operating their business as they see fit,” he says.

The economic and environmental value of the commuter benefits program may be undercut by the requirement behind it, Black says.

Black believes education would go a long way toward promoting public transportation. Employers would be more likely to offer the program voluntarily if they understood its tax advantages, he says.

Employers may comply with the proposed mandate, but the backlash may lead them to do nothing to make sure their employees take advantage of it. The Chamber of Commerce has asked the city to provide a one-year window between enacting the law and its enforcement to give the organization more time to educate employers. But Black says he expects a time frame closer to three to six months.

“The idea is, let’s get employers to actually buy into marketing it to employees,” he says. “Just because they offer it doesn’t mean anyone knows about it or they take you up on it.”

—Jeremy Smerd

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Chrysler LLC is spending an additional $1.8 billion on new vehicle programs, including an expansion of its Jefferson North (Detroit) Assembly Plant, vice chairman and president Tom LaSorda said.

Jefferson North will get a new body shop and a paint-shop upgrade for a new generation of vehicles for the start of production in 2010.

In prepared remarks for his speech Wednesday, August 13, LaSorda said the expansion and new vehicle program will help create 400 new jobs in Michigan.

LaSorda did not reveal the vehicles, but he told Detroit radio station WJR-AM 760 it would be a car-based SUV. He was speaking at the Management Briefing Seminars in Traverse City, Michigan.

The plant currently builds the Jeep Grand Cherokee and Jeep Commander.

LaSorda also said Chrysler has identified $1 billion in nonearning assets it plans to sell. He said the automaker is halfway toward achieving that goal. The plant will be flexible to allow multiple different vehicle models to be built on the same assembly line, LaSorda indicated. The expansion adds 285,000 square feet.

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

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At a time of economic turbulence, Laurence G. O’Neil has firsthand experience in the industries that are at the eye of the storm—health care, energy and financial services.

He has been an HR executive in each of those sectors. As the new president and CEO of the Society for Human Resource Management, he wants to help the field contribute to solving the problems facing the economy.

“It is an unprecedented time for our country and our businesses,” O’Neil said in an interview with Workforce Management on Tuesday, August 12. “The need for HR and for SHRM has never been greater. There’s a strong convergence between SHRM’s values and my values and the advancement of the profession.”

O’Neil was named SHRM’s chief executive on Monday, August 11. He officially takes on his new role October 1. Between now and then, he and his wife will be transitioning from California to the Washington, D.C., area, where SHRM is located.

O’Neil replaces Susan Meisinger, who served as SHRM president and CEO from 2002 until June 30. She announced her retirement in January, citing the need to spend time with ill family members.

After reviewing more than 400 candidates, SHRM selected O’Neil, who was most recently senior vice president and chief human resources officer at Kaiser Permanente, a $40 billion not-for-profit health care organization with 158,000 employees.

His experience also includes 17 years at Bank of America, where he was executive vice president and chief human resources officer of global corporate and investment banking. He also directed the bank’s HR functions in Asia.

During his 28-year HR career, O’Neil also has been a managing director at the executive search firm Heidrick & Struggles, an HR manager at Pacific Gas & Electric Co. and manager of international compensation at Wells Fargo Bank.

“He’s been in good industries for the future of the economy,” said Fred Foulkes, a professor of organizational behavior at the Boston University School of Management and a member of the SHRM Foundation board.

Foulkes worked with O’Neil at the Human Resources Policy Institute, an organization based at Boston University that comprises 50 top HR leaders. O’Neil served on the organization’s steering committee.

“He’s a very solid thinker,” Foulkes said. “He has a deep interest in learning.”

O’Neil is a good fit for SHRM, Foulkes said.

“He has a passion for HR,” he said. “It’s a great way to cap off a career.”

One of the high points of O’Neil’s arc was the most recent one—his time at Kaiser Permanente. He worked there from 2002 until the second week in January.

O’Neil overhauled the company’s people management practices by implementing HR service centers and improving labor relations. It was part of an overall effort to revitalize Kaiser Permanente to respond to a changing health care market.

“He was a key part of a team that did a lot of positive things,” Foulkes said.

O’Neil, 59, said he accomplished his goals at Kaiser and helped hire and train his successor.

“It was the right time to move on to the next chapter of my life,” he said.

He turned over a new page early this month, when he accepted the SHRM position. He was introduced to the staff on August 11, his first visit to headquarters in Alexandria, Virginia.

O’Neil praised Meisinger for leaving behind a solid foundation.

“My first impression is that I’m a lucky new CEO,” he said. “I’m thrilled to be here.”

SHRM has 245,000 members and generated $105.4 million in revenue in 2007. It has about $160 million in reserves.

“He’s taking over an organization that’s extremely strong,” Foulkes said. “There’s no kind of crisis. He can take it to the next level.”

—Mark Schoeff Jr.

With automatic enrollment into 401(k) plans now the norm among employers, many say that defined-contribution plans are looking a lot like defined-benefit plans these days. A proposal by the Retirement Security Project could make them even more similar.

In June, the Washington-based think tank published a paper proposing a way that companies could automatically enroll a portion of retiring employees’ 401(k) assets into a lifetime income option that would provide them with monthly payments.

Under the plan, a portion of a retiring employee’s 401(k) assets would automatically be swept into an annuity product chosen by the employer unless employees opt out of the program. Retirees not opting out would stay in the plan for a trial two-year period, during which they would receive monthly payments from their 401(k) plan, according to the paper. After two years, retirees could choose to continue with the plan or cash out.

The goal is to make sure retirees’ savings last them through retirement, says Lina Walker, research director of the Retirement Security Project, a joint venture between the Brookings Institution and Georgetown University.

Too often, employees cash out their 401(k)s when they retire, she says. And while it might not be a big issue now since many retiring employees have both defined-benefit and defined-contribution plans, that won’t be the case in a few years, Walker says.

“Most people retiring now have both a 401(k) and a defined-benefit plan, so the whole issue of improving the payout options within a 401(k) hasn’t been a big deal,” Walker says. “But that’s not going to be the case 20 years from now.”

By having a two-year trial period for retirees to receive monthly payments, the plan could help change the mind-set of many retiring employees who are hesitant to keep their money in an annuity product, she says.

“We know that a lot of people undervalue lifetime annuity products because they don’t understand how they work and often the pricing isn’t transparent,” Walker says. “This could make it easier for them.”

Industry experts applaud the proposal for highlighting how 401(k) plans could better address the income needs of retirees.

“Everyone is always talking about how it’s too bad that employees always take lump sums out of their 401(k) plans, but no one is doing anything about it,” says Judith Mazo, senior vice president and director of research at Segal. “This is a practical way to address the situation.”

However, Mazo and other industry experts say it’s going to take a lot for employers to want to add annuities to their 401(k) plans because of fiduciary concerns as well as the administrative burden.

“Employers have not shown any sign of wanting to default employees into an annuity,” says Dallas Salisbury, president of the Employee Benefit Research Institute.

Salisbury also says it’s going to be difficult for insurance companies to price an annuity product if the account holders can cash out after two years. Usually the pricing of annuities is based on the life expectancy of the account holders.

“It appears to me this isn’t feasible,” he says.

But executives at MetLife, which offers annuities to 401(k) plans, say they could price the two-year trial product.

“MetLife would view pricing the trial annuitization feature of providing liquidity at the end of two years as being comparable to providing a death benefit equal to the value of the annuity during that two-year period,” says Jody Strakosch, national director, institutional income annuities. “This is a minor cost and is easily incorporated into the price of the annuity.”

However the issue of employers being willing to offer this program is going to be a weighty challenge for the proposal, says Melissa Kahn, vice president of government and industry relations at MetLife.

While the paper proposes safe harbors for employers, there’s a need for added incentives, she says.

Walker concedes that there are issues to be worked out. But she hopes the paper will initiate some conversation.

“We don’t have all of the answers,” she says. “But the basic concept is there.”

—Jessica Marquez

 

Employers’ health care costs are expected to increase by more than 10 percent in 2009, according to research from Aon Consulting Worldwide.

The survey of more than 70 leading health care insurers, representing more than 100 million insured individuals, forecasts an average 10.6 percent increase in health care costs for the 12-month periods beginning this year between April and September.

According to the survey, actuaries expect costs to increase by 10.6 percent for health maintenance organization plans, 10.5 percent for point of service plans, 10.7 percent for preferred provider organizations and 10.5 percent for consumer-directed health care plans.

The increases are slightly lower than those projected a year ago and are the lowest since the study began in 2001. In 2007, forecasters saw a 10.9 percent increase in health care costs, and a 16 percent increase in costs was projected in 2002, the highest rate since the study began.

“While the medical trend rate is still more than twice the consumer price index, it is encouraging to see that health care cost rate increases are continuing to slow down,” John Zern, Chicago-based Aon Consulting’s U.S. health and benefits practice director, said in a statement. “This is a step in the right direction for companies nationwide that continue to feel significant health care price pressures.”

The study also found prescription drug costs are expected to increase 9.2 percent, down slightly from the increasing trend of 9.5 percent a year ago.

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