Author: Site Staff

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.

With globalization in full swing and China and India securing their role as international economic powerhouses, a corporate version of wanderlust is on the rise. And the new expatriates are increasingly young, female and single.

Relocation opportunities are rising and companies around the world are becoming more adept at filling positions by drawing from a global workforce, according to new research by relocation consulting firms.

Motivated by a need to cut costs, fill temporary shortages and make expat lifestyles more appealing to employees, companies have reduced the traditional overseas tour of duty to less than a year. The average used to be between three and five years.

Such changes are in part aimed at nurturing talented female managers. Shorter stints that take less of a toll on the family allow women in particular to gain international experience they would otherwise have passed up, says Sue Evens, a director at Cartus Consulting.

“If half your workforce is women,” Evens says, “that is the talent base you will need to grow your people from.”

Cartus’ “Emerging Trends in Global Mobility” report showed a changing dynamic in the types of overseas assignments since the survey was last conducted three years ago. As of 2007, 56 per- cent of the overseas workforce is under age 40, and the expats are increasingly single (43 percent) and female (21 percent). That last figure is up from around 15 percent in 2004, according to Cartus.

In China, where talent shortages have given women more overseas opportunities, 28 percent are female.

“The face of the transferee has changed,” says Brenda H. Fender, director of global initiatives for Washington-based Worldwide ERC, a relocation consulting firm. “It’s not just Anglo and male. It’s all people from all countries—lower-level professionals and not just top-level people. Companies are going after specific skill sets.”

Today, the U.S. is the most common destination to send employees; within the next three years, China will become the top relocation destination, Evens says. Likewise, India is also emerging as a relocation destination.

Earlier this year, David Hickman, a solutions and alliances manager at Infosys, temporarily moved with his wife and two young children from Dallas to Bangalore, where the outsourcing company is based.

The three-month move was voluntary, and Hickman believes it will help him better understand the way Infosys operates. He also thinks the move endeared him to his Indian colleagues.

“I got a real feel for company culture and a great appreciation for how our company has grown up,” he says.

Perhaps most striking, both Evens and Fender say, is that global relocation activity has picked up everywhere. It’s not just U.S. companies sending Americans abroad. Companies surveyed by Cartus reported sending employees to 51 destinations, a 71 percent increase from just three years ago.

“There is just an increase in [relocation] activity globally,” Fender says. “And I think it’s due in part to the global competition for talent.”

—Jeremy Smerd

Given the proposed regulations the U.S. Treasury released last week related to the Pension Protection Act’s restrictions on the benefits provided by underfunded pension plans, companies might want to check immediately on their plan’s level of funding for this year, according to a retirement plan expert at Aon Consulting.

The year-old pension law put new limits on underfunded plans’ ability to pay lump sums, increase benefits or even accrue benefits for participants. And for the first time, the PPA requires companies to get a certification from their actuaries as to their level of funding.

Marge Martin, a vice president with Aon Consulting, said the proposed regulations give companies that are at least 90 percent funded for 2007 an extra six months in 2008 to obtain that certification.

If plans operate on a calendar-year basis, the new regulations give them until April 1 to get the certification, Martin said. “And if you’re at 90 percent [funding], you’re good for another six months, until October 1.”

The 90 percent funding measure is based on a plan’s January 1 numbers, using calculations based on the old pension laws.

Martin noted that September 15 is the last opportunity to make contributions for the 2006 year. Companies that find themselves short of that 90 percent level may want to make an additional 2006 contribution to achieve the 90 percent target, she said.

“It may save you from rushing to get a 2008 certification for April 1,” she said. “It will give you until at least that October 1 date.”

The PPA stipulates that pension plans that are less than 60 percent funded cannot pay lump sums to retiring workers, while those that are more than 60 percent funded but less than 80 percent funded can pay retiring workers a lump sum equal to only half their benefit. Plans that are in bankruptcy cannot pay lump sums unless they are 100 percent funded, a provision that Martin said is of particular concern.

Plans that are less than 60 percent funded must also stop accruing benefits for participants and are not allowed to pay shutdown benefits.

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

The already serious data security problems at Internet job site Monster.com have become a federal case—literally.

Nearly 150,000 users of USAJobs.gov, the official federal government job site for which Monster provides technology, have been affected by malicious software that siphoned off their contact information. And Monster now says the data breach that affected 1.3 million job seekers with résumés posted on Monster.com wasn’t an isolated incident, and that “the scope of this illegal activity is impossible to pinpoint.”

The troubles at Monster, which include concerns about “phishing” spam attacks designed to blackmail job seekers or snag sensitive information, have raised new questions about the safety of online job hunting. And they raise concerns about other government services provided by Monster.

Monster subsidiary Military Advantage provides technology for TurboTAP.org, a U.S. Department of Defense Web site designed to help veterans and members of the National Guard and Reserve transition to civilian life.

A Monster representative could not be reached for comment.

In mid-August, computer security firm Symantec announced that a piece of malicious software known as a “Trojan” was trying to access Monster.com and uploading data to a remote computer. Monster said the contact information of approximately 1.3 million job seekers was contained on the rogue computer server, that the information on the computer was limited to names, addresses, phone numbers and e-mail addresses, and that Monster had shut down the computer.

Monster warned that the information appeared to have been gathered for the purpose of sending fake e-mails designed to persuade users to engage in financial transactions or lure them into downloading malicious software.

On August 27, the U.S. Office of Personnel Management said 146,000 subscribers to USAJobs.gov were affected in a data breach.

A security warning now on the USAJobs Web site reads: “Recently, malicious software, known as Infostealer.Monstres, was used to gain unauthorized access to the Monster.com résumé database to steal the contact information of job seekers. Monster Worldwide is the technology provider for the USAJobs Web site and, regrettably, some of the contact information captured came from USAJobs job seekers.”

It adds: “The information captured included name, address, telephone number and e-mail address. Monster Worldwide has assured the U.S. Office of Personnel Management that Social Security numbers were NOT compromised because of IT security shields USAJobs has in place.”

In a statement issue on August 31, Monster said it had sniffed out the trouble at USAJobs.com. “Monster is from time to time subject to illegal attempts to extract information from its database,” Monster said. “When suspicious activity has been detected on its site, Monster has disabled the customer login credentials involved, and contacted the employer-customer to discuss the suspicious activity. This was the case with the suspicious activity that affected USAJobs.com.”

Also last week, Monster said it was notifying all job seekers with an active résumé on Monster sites about preventative measures they can take to protect themselves from online fraud. And the company said it “will institute a comprehensive set of new systems and processes designed to enhance existing security and minimize such threats in the future.”

Even so, Monster has not answered some basic questions about how contact information for 1.3 million people ended up on a computer server in Ukraine. “Despite ongoing analysis,” the company said last week, “Monster cannot determine when that data was stolen or how many separate attacks that data represents.”

—Ed Frauenheim

Organizations representing both employers and employees have asked the U.S. Treasury to keep the Internal Revenue Service from disqualifying cash-balance plan conversions that use a design allowing workers to receive either the benefit provided by the traditional pension plan or that offered by the cash-balance plan, depending on which is most generous.

According to the letter sent to the Treasury Department, the IRS is challenging some plan conversions on the grounds that their “greater of” design conflicts with the agency’s backloading rules, which prohibit pensions from concentrating a plan’s benefits in the later years of a worker’s employment.

The letter was signed by seven organizations, including AARP, the American Benefits Council, the Business Roundtable, the ERISA Industry Committee and the Service Employees International Union.

Lynn Dudley, vice president of retirement policy for the American Benefits Council, pointed out that companies began using “greater of” designs after cash-balance plan conversions were challenged in the 1990s as discriminating against older workers.

“They started looking for protections they could implement to ensure they wouldn’t have a problem,” Dudley says. “They would grandfather people and give them the ‘greater of’ for some period of time.”

She noted that the backloading regulations, which were written long before cash-balance plans existed, only have a problem with “greater of” designs when they’re applied to a combination of the benefit formulas, rather than each benefit formula separately.

“We’d like Treasury and IRS to come up with a way to solve this problem,” Dudley says. “What we want them to do is take a look at each formula. If both formulas satisfy the rule, then there ought not be a problem.”

The IRS is currently evaluating a sizable backlog of cash-balance plan conversions. It stopped issuing letters of determination for defined-benefit pension plans converting to a hybrid design, such as cash balance, back in 1999. The IRS announced in December 2006 that it would resume issuing such letters and hoped to work its way through the backlog by the end of 2007.

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

If Labor Day was like Christmas, American employees would be opening better health insurance as their present this year.

That’s the upshot of a recent survey of 1,223 employed U.S. adults by Harris Interactive. The study, released Tuesday, August 28, and sponsored by human resources software firm Kronos, found exceptional health care coverage to be the most desired benefit currently not offered by employers. Among benefits employees currently do not have, 100 percent coverage of health care costs by the employer is considered a more desirable benefit to employees than competitive salary.

“Along with competitive pay, employees are clearly looking for increased fringe benefits, most importantly, health care,” Jared Bernstein, senior economist at the Economic Policy Institute think tank, said in a statement. “Employers who recognize and respond to these needs will be rewarded with stronger employee relationships and a more dedicated workforce.”

The system of employer-based health care coverage in the U.S. has roots in the World War II period, when companies began offering health insurance as a fringe benefit to attract workers in a tight labor market. But the percentage of Americans without health care coverage has been rising in recent years. The U.S. Census Bureau on Tuesday, August 28, said the number of people without health coverage rose from 44.8 million—15.3 percent—in 2005 to 47 million—15.8 percent—in 2006.

One reason for the trend is that employees are struggling to pay for their share of employer-sponsored health care, says Helen Darling, president of the National Business Group on Health, a nonprofit group that represents large employers. 

Darling says big companies generally are not pushing a higher percentage of health care costs to employers these days, as they were doing several years back. On the other hand, raising the level of the employer’s share much beyond the national average of 80 percent does not make sense, she argues. That’s because employees are unlikely to value a benefit if it is completely free, Darling says.

“I don’t think anybody’s going to do that,” she says.

Like the new Kronos-sponsored survey, a study earlier this year by the National Business Group on Health found health care coverage to be vital to employees. Its poll of 1,619 employees at large U.S. employers found that most workers consider the health plan to be their most important benefit and that they have little interest in purchasing coverage on their own. The report also showed that employees are generally unwilling to reduce their health benefits in order to increase other benefits such as a retirement savings plan.

Darling says smart organizations are taking steps to improve the health of their workforce, which can help employees and reduce health care costs for the corporation. These measures include paying for selective preventive services, such as colonoscopies and vaccinations. She says companies are also giving financial incentives for healthy life choices, such as not smoking.

“I think we will see more and more of that,” Darling says.

During the past four decades, the average growth in health spending in the U.S. has exceeded the growth of the economy as a whole by between 1.3 and 3.1 percent, according to an August report by the Henry J. Kaiser Family Foundation. But since 2003, the foundation says, the rate of increase in premiums for employer-sponsored health insurance has been falling, to 7.7 percent last year.

That’s good news for U.S. businesses, which frequently compete with foreign-based competitors who can rely on national health care systems to provide their employees with health coverage.

Despite the trend of slower-growing premiums, there’s plenty of talk in the country about bigger reforms to the health care system. These include greater use of health savings accounts and some form of universal health care.

In the meantime, the recent Kronos-sponsored study suggests companies should continue to provide their employees with health insurance if they want to fight turnover. Workers surveyed in the report ranked a comprehensive health care benefits program among the top three reasons they have stayed with their longest-term employer.

—Ed Frauenheim

When former Home Depot head Robert Nardelli arrived in Auburn Hills, Michigan, on August 6 to take over as Chrysler’s CEO, he reiterated the company’s plan to cut 13,000 jobs as efficiently as possible.

The rapid cost cutting that permeates the auto industry in Detroit, where one in four industry jobs has been eliminated since 1999, has been justified by executives as a crude yet necessary short-term measure to make the domestic auto market solvent. The fallout, however, is creating a dramatic white-collar talent shortage among the Motor City’s Big Three auto¬makers, analysts say.

“We’re just seeing the beginning of a major talent crunch,” says Bradford Marion, senior client partner and leader for the automotive sector at consultancy Korn/Ferry International.

For example, there is Ford Motor Co., which announced plans last year to eliminate 30,000 hourly and salaried workers. Marion says it’s nearly impossible to do that without disrupting the company’s ability to cultivate and retain talented managers.

“It’s really hard to control whether you’ve picked the right 30,000 people,” Marion says. “As fast and with as many people involved [in losing their jobs], you’re not going to get it exactly right.”

As thousands of workers leave the auto industry, some of those gaps will be filled by outsiders like Nardelli, who joins the industry along with former Boeing executive vice president Alan Mulally, who now is CEO at Ford.

But with the future of the domestic industry unclear, attracting talented employees to positions that are not specific to the auto industry may be difficult. Marion said turnover was highest in finance, information technology, operations and supply chain management positions, as employees took the opportunity of a buyout to get into more stable industries.

“We typically don’t find people leaving their occupational areas,” says John Patricolo, an executive vice president at Right Management, an employment services company with offices in Detroit. Patricolo says the company has helped nearly 3,000 former white-collar Ford employees find new jobs in the past year. “Engineers will stay engineers. They just may go to aerospace or they may go to heavy-machine manufacturers.”

Patricolo says 74 percent of the white-collar employees his firm has helped find new jobs remain in southeast Michigan. Many go to automotive suppliers or to consulting firms.

Ford has long been a feeder company for other branches of the industry, a phenomenon brought home August 8 when Ford’s Mulally looked out at an industry conference of suppliers and said, “I think everybody is from Ford. They’re everywhere.”

One place where talented employees from Detroit automakers likely will not land is Toyota Motor Corp.

“We tend to promote from within, and that program hasn’t changed,” says Jim Lentz, an executive vice president at Toyota.

The Japanese automaker’s emphasis on its own automobile production process to cultivate managers, called the Toyota Way, is indicative of the cultural rift that separates the domestic carmakers from their Japanese rivals, observers say. Domestic carmakers have relied too heavily on people—as opposed to processes—to drive change and innovation in the industry.

“ ‘Process’ is not the culture of GM, Ford and Chrysler,” says Laurie Harbour-Felax, managing director at Stout Risisus Ross, a consultancy with offices in Detroit. “They are very people-dependent.”

As a result of the upheavals in the industry, domestic companies may face operational and developmental problems that could cost billions of dollars.
“There is a brain drain,” Harbour-Felax says, “and the people who have left have not transferred their knowledge to those who have stayed behind.”

—Jeremy Smerd

After the recent demise of major immigration reform legislation, the Bush administration will crack down on illegal hiring next month—a move that some employers worry could severely disrupt the labor market.

Experts contend that legal workers could get caught in the net of the Department of Homeland Security’s initiative, which will force companies to either resolve within 90 days discrepancies between a worker’s name and Social Security number or fire the employee.

Mismatches occur in about 4 percent of the 250 million earnings reports submitted annually to the Social Security Administration. Companies that receive these “no-match letters” currently aren’t compelled to act on those inconsistencies.

Employers don’t resist confirming work eligibility, but are concerned about flaws in government databases, according to groups representing them. The HR Initiative for a Legal Workforce says that the Social Security Administration estimates that 17.8 million of its re¬cords have “no-match” inconsistencies affecting 13 million Americans.
 
Some of the differences between company and government information are due to clerical errors or changes in marital status. But the 90-day window can close quickly in the bureaucratic resolution process.

“It’s going to knock out some people who are not foreign nationals, who are not here on temporary visas,” says Montserrat Miller, a lawyer with Greenberg Traurig in Washington.

About 5 percent to 10 percent of the U.S. workforce could be vulnerable, says William Manning, a partner at Jackson Lewis in White Plains, New York.

“If the government goes around disenfranchising those people, you could have a recession or depression,” he says.

The homeland agency takes a more benign view of the regulation, which will be implemented in this month (September). Homeland Security Secretary Michael Chertoff describes the initiative as a tool to help employers deal with no-match letters.

“This regulation lays out a clear path to doing the right thing,” Chertoff said during a press conference. “What the company may not do is ignore the problem.”

Other steps the administration is taking to curtail illegal employment include raising civil fines as high as $12,500 per violation and eventually requiring 200,000 federal contractors to use E-Verify, a government electronic verification system formerly called Basic Pilot.

One critic, the Society for Human Resource Management, asserts that the system is inefficient and ineffective against identity theft. Homeland Security says it is adding a photo-screening mechanism to the system to help combat stolen identity.

Chertoff calls E-Verify “quick and … easy to use” and emphasizes that companies that follow the no-match procedures will avoid trouble.

“The person who does their best in good faith has nothing to fear from us,” he says. “We’re going to clamp down on employers who knowingly and willfully violate the law.”

Employer advocates, however, say the no-match regulation now effectively makes a company’s failure to act an immigration violation.

“They’ve turned the presumption completely around,” Manning says.

As it announced punitive immigration measures, the Bush administration also says it will streamline existing temporary worker programs that help industries such as agriculture, landscaping and hospitality.

Still, those groups may be hit hard.

“You could see doors closing on businesses,” says John Gay, senior vice president for government affairs and public policy at the National Restaurant Association. “We warned against doing this—enforcement without reform.”

—Mark Schoeff Jr.

 

Employees who designate a portion of 401(k) or other savings plan contributions to pay for retiree health care coverage will be taxed on those contributions, the Internal Revenue Service says.

In proposed rules published last week, the IRS said such an arrangement is not entitled to tax-favored treatment and that such contributions would be included as taxable income to the employee.

While such arrangements have long been discussed, few employers have implemented them amid informal warnings from IRS officials that the arrangements are not entitled to the same tax breaks provided to other benefit plan designs.

“In the past, the IRS has not looked favorably on these arrangements,” says Amy Bergner, an attorney with Mercer Human Resource Consulting in Washington.

Now, with the IRS officially laying out its position through proposed rules, “it is the final nail in the coffin” of such designs, says Andy Anderson, of counsel with the law firm Morgan, Lewis & Bockius in Chicago.

“The IRS has made its position crystal clear,” says Kyle Brown, an attorney with Watson Wyatt Worldwide in Arlington, Virginia.

The appeal of such designs is obvious: Employees would make pretax contributions to 401(k) plans, the money would earn tax-free interest and then could be pulled out tax-free to pay for retiree health care premiums.

“It would be a triple crown of tax-free funding,” Anderson says.

But the IRS, in its proposed rules published in the August 20 edition of the Federal Register, says Congress has very “carefully and strictly limited the ability to prefund” health care benefits on a tax-favored basis.

Under federal law, employers can designate that up to 25 percent of their contributions to their defined-benefit pension plans be used to fund retiree health benefits, while a portion of assets from overfunded pension plans can be used for the tax-favored funding of retiree health care benefits so long as certain conditions are met.

Additionally, last year’s sweeping pension funding reform law includes a provision through which retired public safety officers can use up to $3,000 a year of their pension benefits to pay for retiree health care premiums on a tax-free basis.

So long as the retiree makes such an election and the amount is directly transferred by the plan to an insurer, the retiree will not be taxed on the amount.

Given how specific Congress has been in laying out rules for tax-favored funding of retiree health care benefits, “a broad exclusion permitting a tax-favored treatment of any distribution used to pay accident or health insurance premiums would be inconsistent with this intentional statutory scheme,” the IRS said.

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

A recent legislative proposal that would require 401(k) retirement plans to reveal more information about fees is being described as the beginning of a discussion about the issue. But in Washington, the scrutiny surrounding costs is becoming a low roar.

In addition to the 401(k) fee bill that was introduced in late July by Rep. George Miller, D-California and chairman of the House Education and Labor Committee, the Department of Labor is considering new disclosure regulations.

The focus on 401(k) charges comes in the midst of the retirement plans’ enormous popularity. Currently, the plans cover 52 million active workers and contain $3.3 trillion in assets. Fueling that growth is major pension reform passed by Congress last year, which enables companies to automatically enroll employees.

Like businesses, Democratic majorities in Congress are also turning their attention to the plans—but for a different reason.

Miller asserts that opaque fees hurt workers. He cites a recent Government Accountability Office study that shows a 1 percent difference in fees could result in a 20 percent difference in returns.

“Hidden fees are eating into the retirement savings of millions of American workers without them knowing it,” he says.

His bill would require plan administrators to list individually every service fee charged to an account and to clearly identify historical returns and fees assessed on each investment option. It also increases transparency from service providers and calls for 401(k) plans to offer at least one lower-cost, balanced index fund.

Business is wary about the potential costs of Miller’s bill. If disclosure is too onerous, “it will add to the expense of administering the plans, which ultimately gets passed on to participants,” says Bill McClain, a principal at Mercer Human Resource Consulting.

Even before legislation or regulations come to fruition, McClain says companies are trying to lower fees and communicate more clearly about 401(k) plans, which are often used to attract and retain sought-after workers.

He emphasizes that fee disclosure shouldn’t overshadow the effort to get more people to participate and increase their contributions.

“We don’t want to drown out those messages,” he says.

—Mark Schoeff Jr.