Author: Site Staff

As General Motors’ negotiations with the United Auto Workers continue, it’s no surprise that one of the things on the table is freezing the automaker’s traditional pension plan for new hourly hires.

But if GM agrees to take this action, it could be the final nail in the coffin for defined-benefit plans, observers say.

According to news reports, GM and the UAW are discussing freezing the defined-benefit plan for new hourly hires and replacing it with a 401(k) plan.

Last year, GM froze its pension for new salaried workers, so doing the same with the hourly workers would be an obvious next step, experts say. And if it does, it’s only a matter of time before the rest of the auto manufacturers and suppliers follow suit, they say.

“If GM does this, it would be extremely significant because the auto industry is the last big one with defined-benefit plans and strong union backing to move away from these plans,” says Ted Benna, who is COO of Malvern Benefits Corp., a 401(k) plan administrator, and is also known as the founder of the first 401(k) plan. “The steel industry went down, then the airline industry went down. The auto industry would be the last biggie.”

The current contract between GM and the UAW expired on Friday, September 14, but the two sides have continued to work day and night to come to an agreement on a number of issues, including health care benefits for retirees and the status of the pension plan.

The framework they agree to will then be applied to Ford Motor Co. and Chrysler Corp. Brenda Rios, a GM spokeswoman, declined to comment on reports about the status of the talks.

If GM does freeze its defined-benefit plan for hourly workers, it will signal to employers in all industries that they can do this as well, says Alicia Munnell, director of the Center for Retirement Research at Boston College.

“It does seem that there is a tendency for firms to freeze their plans if other firms have done so,” she says. “It makes it more socially acceptable.”

But David Wray, president of the 401(k)/Profit Sharing Council of America, doesn’t agree. He believes that most companies with defined-benefit plans are coming to this decision on their own and won’t be affected by what GM does.

“Obviously other companies within the automobile manufacturing sector will follow suit,” he says. “But companies in other industries will continue to make this decision on a company-by-company basis.”

And the reality is that there are still many industries where defined benefit plans are alive and well, says Dallas Salisbury, president of the Employee Benefit Research Institute.

“Twenty percent of the labor workforce are in defined benefit plans accruing benefits,” he says, noting that companies like General Electric and AT&T still run these plans.  

“While it may be true that old-school declining industries are moving away from defined benefit plans, there are still many growing industries that are keeping them.”

The potential upside of an employer the size of GM switching solely to a 401(k) plan for new hires is that it could create further public scrutiny of whether these plans are adequate to ensure employees’ retirement security, Munnell says.

While the Pension Protection Act, which allowed for automatic enrollment and increases, helped a lot in this regard, more needs to be done, she says.

“If we are going to have an additional hundreds of thousands of employees depending on the 401(k) plan, hopefully it will further these discussions,” Munnell says.

—Jessica Marquez

Just before its summer recess in early August, the Senate approved legislation that would extend unpaid leave for wounded military personnel from the 12 weeks allowed under current law to six months.

But it isn’t that expansion of leave that has business groups particularly worried. Nor is it larger bills that would establish paid leave for eight weeks. Those may be too large to squeeze through the legislative process in the near future.

Corporate advocates are instead keeping a wary eye on a more targeted measure that would require companies with 15 or more employees to provide seven paid sick days annually for people who work at least 20 hours each week.

The Senate bill has the enthusiastic sponsorship of Sen. Edward Kennedy, D-Massachusetts and chairman of the Senate Health, Education, Labor and Pensions Committee. Committee approval of the House version could occur whenever the Democratic majority decides to move.

“I would look at this as the more serious bill on the threat matrix,” says Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce.

One reason business groups resist the paid sick leave bill is because the seven days would be added to companies’ existing paid-time-off benefits unless the leave was specifically designated as sick time.

In addition, the bill would prohibit employers from changing their leave policies between the time it is enacted and when it becomes effective.

Advocates for the bill, however, say that the relationship between paid time off and paid sick days has yet to be worked out because of the many PTO variations.

Besides, paid sick days will reduce costs for employers, says Vicky Lovell, director of employment and work/life programs at the Institute for Women’s Policy Research.

She argues that companies will save about $8 billion annually by reducing turnover, increasing productivity and curtailing the spread of the flu in the workplace.

Supporters highlight the successful launch of paid sick days in San Francisco, the first jurisdiction to implement such a law.

The transition has been smooth because the city communicated extensively with local businesses through a three-month hearing process and a Web site, according to Greg Asay, a senior analyst in the Office of Labor Standards Enforcement.

“The sky hasn’t fallen,” he says. “We kept our eye on ‘Let’s make this as simple as possible for employers to implement.’ ”

Regardless of company reaction, proponents say that they are building momentum for paid sick days because the policy would mostly benefit low-income and minority workers, many of whom are in the hospitality and food service industries.

“What we’re seeing throughout the nation is a real desire to move forward on economic justice issues,” says Sonya Mehta, a Young Workers United organizer. About 52 percent of private-sector employees receive paid sick days.

But the corporate lobby asserts that PTO is one of the most common benefits offered by employers, who will fight back if more is piled on legislatively.

“Paid leave is a threshold issue for the business community,” says Randel Johnson, vice president for labor, immigration and employee benefits at the U.S. Chamber of Commerce.

—Mark Schoeff Jr.

A bill that would put mental health treatment on the same level as medical and surgical benefits unanimously passed the Senate late Tuesday, September 18.

The measure, which was the product of more than two years of negotiations among lawmakers, insurers, patient advocates and the business community, would require equality between mental health and medical/surgical benefits on treatment limitations, costs—such as deductibles and co-payments—and out-of-network coverage. It does not mandate mental health coverage.

Now the Senate will have to wait on the House. On that side of the Capitol, a bill was approved on Wednesday, September 19, by a Ways and Means subcommittee. It has been sent to the Energy and Commerce Committee. The Education and Labor Committee has already passed it.

Business lobbyists oppose the House version as strongly as they support the Senate bill. Among their most significant problems with the House approach is that it would require that mental health plans cover all diseases included in the Diagnostic and Statistical Manual-IV.

Employers worry that they would have to cover substance disorders like caffeine addiction. They also are concerned that the House bill would curtail managed care.

Proponents assert that using the DSM would end “discrimination by diagnosis” and dispute that the House bill would limit medical management.

Senators gingerly addressed prospects for a conference committee during a media availability on September 19.

“I don’t want to start on a footing that will make it more difficult to get a bill [through],” says Sen. Pete Domenici, R-New Mexico, one of the measure’s authors, as he declined to elaborate on potential sticking points.

He acknowledged, though, that the diverse coalition backing the Senate bill gives it momentum.

“We’ll go to conference carrying that with us, knowing that it makes the bill pretty passable,” Domenici says.

There is some chance that the House will take up the Senate bill and approve it rather than vote on its own version. One reason is because of an agreement hammered out by Domenici and Sen. Edward Kennedy, D-Massachusetts, on policy toward pre-emption of state mental health parity laws.

The legislators, in concert with business, insurance and patient groups, decided that the Senate bill would keep in place a law that allows states to regulate insurance, and the federal government to regulate group health plans.

This approach essentially would ensure a federal floor for mental health benefits that could then be increased by individual states. Although business lobbyists preferred previous language that would allow federal law to prevail, they backed the modification because it ensured Senate passage.

“In a way, we authored this change,” says E. Neil Trautwein, vice president and employee benefits counsel at the National Retail Federation. “It is a standard we know and can live with.”

Kennedy commended business groups and other members of the coalition for their flexibility, saying they “looked at hard practical realities” rather than blocking progress.

Kennedy and Domenici are now on the cusp of achieving a breakthrough in mental health coverage that they have advocated for years.

About 26 percent of American adults, or 58 million people, suffer from a diagnosable mental disorder annually, but only a third receive treatment. The senators say their bill will improve coverage for 113 million people.

“Today, the U.S. Senate says to them, loud and clear: You will no longer suffer in the shadows,” Kennedy says. “The stigma against the mentally ill is a blatant form of discrimination.”

Domenici, who has a family member with a mental illness, was moved by the bill’s success.

“We’ve been living an absolutely, totally unfair situation,” he says in reference to mental coverage being denied or made more expensive than physical benefits. “The way we’ve been doing it is wrong. [The Senate bill] is a matter of simple fairness.”

Advocates hope that change will occur soon, if the House embraces the Senate bill. “Then we can all enjoy a Rose Garden signing ceremony,” Trautwein says.

Such a celebration might be a harbinger for increased cooperation between business and the Democratic majorities on Capitol Hill.

The participation of a wide range of interest groups in cobbling together the Senate bill “allowed for the vetting of the concerns that all these stakeholders brought to the table,” says Kathryn Wilber, health policy legal counsel at the American Benefits Council.

The process might be viable in the future when Congress tackles larger health care issues. “This is a model that would work going down that road,” Wilber says.

—Mark Schoeff Jr.

Time is running out for major health care reform, but a rifle-shot bill that would put mental health treatment on the same level as medical and surgical benefits could move quickly in the Senate now that Congress has returned from its August recess.

The momentum has been provided by an agreement just before the break between Sens. Edward Kennedy, D-Massachusetts, and Pete Domenici, R-New Mexico, on policy toward pre-emption of state mental health parity laws.

The legislators, in concert with business, insurance and patient groups, decided that the Senate bill would keep in place a law that allows states to regulate insurance, and the federal government to regulate group health plans.
 
This approach essentially would ensure a federal floor for mental health benefits that could then be increased by individual states.

Although business lobbyists preferred previous language that would allow federal law to prevail, they backed the change because it keeps the Senate bill on track for passage.

“In a way, we authored this change,” says E. Neil Trautwein, vice president and employee benefits counsel at the National Retail Federation. “It is a standard we know and can live with.”

Both the Senate version and a similar House measure would require equity between mental health and medical/surgical benefits on treatment limitations, costs — such as deductibles and co-payments — and out-of-network coverage. Neither mandates mental health coverage.

The House and Senate labor committees have both approved their respective bills. Two more House committees must work on that chamber’s version. Each measure has enough co-sponsors—268 in the House and 57 in the Senate—to ensure floor passage.

Business groups oppose the House bill because it would require that mental health plans cover all diseases included in the Diagnostic and Statistical Manual-IV. Employers worry that they would have to cover substance disorders like caffeine addiction. They also are concerned that the House bill would curtail managed care.

Proponents assert that using the DSM would end discrimination by diagnosis and dispute that the House bill would limit medical management. About 44 million Americans suffer from mental illness, but only a third receive treatment.

Although the Senate and House approaches vary widely, advocates of the Senate bill believe that a potentially difficult conference committee featuring two Kennedy generations could be avoided. The House version was co-written by Rep. Patrick Kennedy, D-Rhode Island.

“There is some hope that the House would adopt the Senate-passed bill and then we can all enjoy a Rose Garden signing ceremony,” Trautwein says.

Such a celebration might be a harbinger for increased cooperation between business and the Democratic majorities on Capitol Hill.

The participation of a wide range of interest groups in cobbling together the Senate bill “allowed for the vetting of the concerns that all these stakeholders brought to the table,” says Kathryn Wilber, health policy legal counsel at the American Benefits Council.

The process might be viable in the future when Congress tackles larger health care issues.

“This is a model that would work going down that road,” Wilber says.

—Mark Schoeff Jr.

Two related medical technologies promise to end fraudulent disability and workers’ compensation claims. All that’s needed from employees is a little DNA.

Developed by the Cytokine Institute, a research and consulting firm affiliated with the University of Illinois College of Medicine at Chicago, the technology uses DNA to determine a link between exposure to a toxin and a serious illness. It does so by identifying a toxin’s unique DNA signature on a person’s affected cells.

The technology, launched in June, has already been used in two dozen civil lawsuits between workers and insurance companies to verify the connection between exposure to toxins and a serious illness, says CEO Bruce Gillis, a doctor specializing in medical toxicology.

“It will get rid of all the nuisance and frivolous lawsuits once and for all,” Gillis says.

Another technology developed by the company can measure the level of cytokines, or small proteins in a person’s cells. Cytokine levels are elevated when an injury occurs. Employers can use a blood sample taken at the time of employment as a baseline, Gillis says. If a worker reports an injury, a new blood sample showing an increase in cytokine levels can verify that an injury has occurred.

“We’re saying if you have a concern about making an accurate diagnosis on a job-related injury or determining whether someone’s pain is real, we have a methodology to track all that and answer those questions,” Gillis says.

Collecting DNA, however, poses privacy and discrimination issues, says Alan Model, an attorney in the Newark, New Jersey, office of Littler Mendelson, the nation’s largest employment and labor law firm.

“This raises a lot of potential employment issues,” says Model, who represents employers. “It’s controversial. There are no federal laws, and state laws vary with how DNA testing can be used. And there are privacy concerns.”

His firm counsels employers against conducting such pre-employment testing. Though no federal laws prohibit genetic testing, Congress passed a bill in April that bans employers from denying employees health insurance based on such tests. More than 20 states have laws that limit or prohibit employers from collecting genetic information.

Celeste Monforton, an occupational health researcher at the George Washington University School of Public Health & Health Services, worries that collecting an employee’s DNA, even for a limited purpose, may expose workers to discrimination.
 
Employers may be able to retroactively determine that a person, based on their DNA, was predisposed to an illness that may have been acquired through work.

“It’s a really slippery slope,” she says.

In 2002, the Equal Employment Opportunity Commission won a $2.2 million settlement in a discrimination suit against Burlington Northern Santa Fe Corp. in what was one of the first cases based on the federal agency’s belief that genetic testing discriminates. The railway was charged with violating the Americans With Disabilities Act by having an employee submit to a physical that included a blood test in order to look for predisposed medical conditions.

In a recent civil case, the Cytokine Institute’s MSDS1 method was employed to determine whether a firefighter’s leukemia was caused by exposure to benzene. When the unique benzene signature was not found in the firefighter’s genes, the case against the insurance company, Liberty Mutual, was settled for a much smaller award, Gillis says.

Cytokine’s technology, AccuHealth Monitoring, also can uncover risk factors for certain cancers, central nervous system disorders, joint-related disease, asthma, emphysema, diabetes and cerebrovascular disease, Gillis says.

ADA and Injury Toolkit
A packet of forms and information on ADA, workers’ comp and disability management.

—Jeremy Smerd

 

As hundreds of companies hustle to respond to recent requests by the Securities and Exchange Commission for further executive compensation analysis, industry experts hope the agency will not set constrictive rules on how to draft such analysis.

The SEC last month sent out roughly 300 letters to large and midsize companies, with about 50 more mailed this month, spokesman John Nester said. Those companies had 30 days to respond to questions, but some petitioned for additional time so that they could meet with their compensation committees.

Among the issues of focus for the SEC, according to several experts who have reviewed the letters, were disparities in pay between the CEO and other executives, performance benchmarks used to set compensation levels and detailed information about a company’s compensation consultant.

Rules passed last winter required companies to include both tables and a narrative explaining how executives are compensated. Some have called for more details in how companies address such issues as performance benchmarks and deferred compensation, arguing that filings aren’t written as clearly as the SEC had hoped.

However, the SEC shouldn’t prescribe how companies write up their analysis and should preserve flexibility, said Amy Goodman, a partner with Gibson Dunn who has reviewed about 20 of the letters. “This isn’t like a tax return,” she said. “Exec comp varies a whole lot from company to company.”

The SEC has asked companies for “greater specificity” in how compensation levels are set, according to people who have reviewed the letters. But by requesting detailed narratives in specific formats, the SEC may be contradicting Chairman Christopher Cox’s push for more plain-English disclosures, critics say.

Furthermore, some of the questions in the letters address issues difficult to answer in some cases, according to Suzanne Hanselman, a partner at Baker Hostetler who has also reviewed several letters. For example, she said, explaining why a CEO makes more than a CFO is an easy question to answer when the CEO has a large amount of stock options accrued over a stretch of time, but in other cases the pay disparity may be based on more subjective data and so may not be as easily explained.

Although the time frame for responding to the SEC letters is tight, especially for companies that hadn’t already planned on convening with their boards of directors and compensation committees, most targets can breathe easy because no rules are expected until next summer at the earliest. An SEC staff report expected later in the fall may serve as de facto regulation for many companies, requiring certain additional data in filings.

John White, director of the SEC’s division of corporation finance, said this summer that most of the filings reviewed by the agency were in “good shape,” but that additional revisions may be required. The SEC will not force companies to restate because of the revisions, except in a few cases, sources say.

The SEC letters and the forthcoming report may shape company filings further.

“The SEC wanted to send a broader message,” said Mark Borges, a principal at Mercer. “The SEC reaction was toned down from [earlier this year].”

A September 7 analysis by Mercer of about two dozen of the letters found that most of the questions were for future filings, and do not require immediate response to the SEC. The SEC may also focus on additional areas in its fall report, such as perks, which were largely ignored in many of the letters, Hanselman says.

Executive compensation rules, the hottest issue at the SEC last year and what Cox has called his legacy at the agency, aren’t likely to simmer down. Congress is pursuing several bills that would grant shareholders a greater say in the compensation process, and further action is expected to come from shareholder proposals in the coming proxy season.

Filed by Nicholas Rummell of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

The Pension Benefit Guaranty Corp., in its general strategic plan for fiscal 2008-2013 released Thursday, September 13, said one key goal will be to enhance its scrutiny of pension plans. 

“Improve risk monitoring and early warning activities and align resources to assure proper plan terminations” will be a goal of the agency, according to the strategic plan.
 
In addition, the PBGC said it wants to “obtain enhanced recoveries from bankrupt plan sponsors that emerge from reorganization, and intervene in corporate transactions to mitigate loss” to the agency.
 
The PBGC is seeking public comment on the plan, which is available at www.pbgc.gov, until October 17.

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

Dear Questions Linger:



Whether these trainers are our company’s employees or professionals to whom you have subcontracted the work, the prescription is the same. First, you must define a successful training event from both an external and internal point of view.

The key is to understand that customer satisfaction drives true success, so begin by identifying the key stakeholders in your customer’s organization and designing metrics based upon what they would or would not expect from a successful event. Stakeholders might include the department purchasing your services, the human resources department, program participants and/or senior management. Because all customers, stakeholders and programs may be different, external success criteria could vary from one training event to the next. So, in the end, you may have multiple success measures based on each customer’s definition of success.

Once you have captured the metrics you believe drive customer satisfaction, you should test them to make sure they measure what was intended. It is important to validate your metrics on a regular basis and to update them based upon your customer’s expectations. For instance, if the customer is not interested in the cost per unit of service, why measure it?

From an internal perspective, your company’s metrics for measuring consultant performance and program success should be consistent and understandable. You must develop a metric that consolidates the previous metrics into one success metric (for example, overall customer satisfaction). Just because the customer’s criteria may vary from engagement to engagement, your performance expectations must allow the trainer to gauge if he/she was successful or not successful.

Your consultants should be fully aware of the expectations of both your customer and your company, and they should understand the metrics and the impact to their success. This will set them up for success by letting them know how to meet both the customer’s needs and those of your company. By clearly setting expectations upfront, you can avoid disappointing your customer and your trainers.

Once the metrics are established and validated, begin measuring and reporting on progress and or issues on a regular basis with both the customer and the training consultant. This will allow for celebration of successes and refocusing if off track.

So, the steps are:

1. Define success from your customer’s perspective.
   
2. Develop success metrics.
   
3. Test and validate the metrics.
   
4. Develop consistent internal metric aligned with customer success metric.
   
5. Test and validate the metric.
   
6. Communicate expectation and metric(s) used to validate success to both the customer and the consultant.
   
7. Measure consistently and update progress regularly.
   

Following these steps will help you to develop a fair and consistent approach to measuring success—both of your programs and your trainers.

SOURCE: Chris Hatcher and Daryl Krimsky, Capital H Group, the Woodlands, Texas, August 1, 2007.

LEARN MORE: Teaching employees to be trainers can be effective, although they are challenges to be met.

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

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Dear Workforce Newsletter

Financially troubled auto parts manufacturer Delphi Corp. will freeze its two pension plans and shift some pension liabilities to former parent General Motors Corp. under a bankruptcy reorganization proposal filed Thursday, September 6, and an agreement reached with GM.

Delphi said the two plans for hourly and salaried employees would be frozen, with participants not earning any new benefits, starting the first month after the reorganization plan receives final approval.

As part of the agreement with GM, Delphi would transfer $1.5 billion in liabilities in the hourly plan to GM. In return, GM would receive a $1.5 billion note from Delphi.

As of the end of 2006, the two plans combined were underfunded by just over $4 billion, with $14.9 billion in liabilities and $10.7 billion in assets, according a Delphi filing with the Securities and Exchange Commission.

Delphi said it will replace the frozen plans with defined-contribution plans.

Delphi, which last year reported a $5.5 billion loss—including about $3 billion in attrition charges—on revenue of $26.4 billion, also will end its health care plan for hourly retirees.

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

UnitedHealth Group will pay out $13 million in a settlement with 36 states and the District of Columbia following a probe of the insurer’s claims processing system.

New York will receive $3.7 million, the largest single amount in the settlement, under the agreement announced Thursday with UnitedHealth Group’s biggest insurance business, UnitedHealthcare. The state will receive an additional $320,000 under a separate agreement regarding the insurer’s violations of New York’s prompt-payment statute, claim appeal rules and other regulations.

UnitedHealthcare will take specific steps in response to the New York findings, including reviewing and reprocessing delayed claims payments with applicable interest going back to January 1, 2003.

UnitedHealthcare agreed to implement a national improvement plan that will be in effect through the end of 2010. The five lead states—New York, Iowa, Florida, Connecticut and Arkansas—will jointly monitor UnitedHealthcare’s market practices.

The plan’s benchmarks include claims accuracy and timeliness, appeals review and consumer complaint handling. If UnitedHealthcare doesn’t meet the benchmarks, insurance regulators could impose up to $20 million in additional penalties.

The national investigation “found many errors in claim processing,’’ such as incorrectly applying fee schedules and deductibles, according to the state Department of Insurance. UnitedHealthcare also frequently violated prompt-payment rules, and when notified, the insurer “was generally unable to correct problems” because of “poor controls and oversight.”

The insurer was proactive in working with states on regulatory issues that set national, standardized goals, according to a UnitedHealthcare spokesman. As a national insurer operating across many states, UnitedHealthcare faces a patchwork of claims processing regulations.

“This is about moving forward and using consistent benchmarks,” the spokesman said.

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