Author: Site Staff

Turnover of chief financial officers spiked 20 percent in the second quarter compared with the first quarter, with a total of 646 executives shuffling in, out or around large U.S. companies, up from 536 in the first quarter.

Churn levels were consistently high: The total number of CFOs who joined, left, resigned, retired or changed positions internally exceeded 200 for the past three consecutive months—a first since Liberum Research began tracking the data in 2005.

“Keep in mind that the second quarter includes both proxy season and quarterly earnings,” says Liberum senior vice president Richard Jacovitz, who explained that the second quarter is typically the period with the highest level of churn each year.

“There are exceptions—when the economy tanks or something major takes place,” Jacovitz says. But barring those events, he said he expects the overall level of management change to drop over the next few months.

The total level of CFO churn was down 1.5 percent from the same period last year, when the second quarter saw an all-time high of 656 shuffles. June turnover, at 202, remained high, but a slowdown appears to have begun: The quarter began with a near-high 233 CFO management changes in April and slowed to 211 in May.

In fact, the number of CFO job changes in June dropped in every category with the exception of new hires, which increased 19 percent, to 82, from 69 in May.

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

Tiring of having changed CFOs three times in less than two years, digital video recording service provider TiVo has chosen to rent its new finance chief.

The Alviso, California-based company has retained Cal Hoagland as its chief financial officer. Hoagland, 50, is a principal of Financial Leadership Group, which provides CFO services and corporate board consulting.

He will serve as TiVo’s full-time CFO as the firm searches for a permanent finance chief, according to a filing July 11 with the Securities and Exchange Commission. The consulting agreement with Hoagland has an initial term of 90 days and can be extended by TiVo in two-week contracts thereafter.

TiVo also said it hired a search firm to find the new CFO.

Renting CFOs is becoming more popular as companies struggle to retain talent, thanks to the unprecedented amount of turnover among chief financial officers during the past several years. A record 2,302 CFOs left their posts in 2006, according to independent research firm Liberum Research, and high turnover is expected to continue.

As a result, companies spent $8.9 billion on temporary financial and accounting assistance last year, up 68 percent from 2002, according to Staffing Industry Analysts, a workforce research firm. Costs are projected to climb another 10 percent this year.

Hoagland replaces Steve Sordello, who resigned late last month to join an unnamed venture-funded company in Silicon Valley. Sordello’s departure marked the third CFO change since early 2006.

According to the regulatory filing, TiVo has agreed to pay Hoagland and Financial Leadership Group a base rate of $2,500 per day, with hours in excess of 55 a week billed at $350 an hour.

The company will also issue Hoagland $1,000 per day in fully vested shares of the company’s common stock. The company said the annualized rate is roughly 15 percent greater than the annual compensation for Sordello.

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

 

Now that a major immigration bill has collapsed in the Senate, business interests are waiting to see whether employer verification and H-1B visa policy will move separately through the legislative process.

So far, Capitol Hill leaders have not committed to returning to immigration in any form following the Senate’s failure in late June to end debate on a bipartisan bill that stoked political passions.

The legislation would have strengthened border security and work-site enforcement, sharply increased fines for hiring undocumented workers, created a guest worker program and established a path toward legalization for many of the estimated 12 million illegal immigrants.

In the end, neither verification nor H-1B issues were formally debated. But an amendment that would have rewritten the verification part of the Senate legislation was called a “deal breaker.”

The Senate bill would have required all 7 million employers to sign up for the government-run electronic employment verification system that is currently being used voluntarily by about 16,000 companies. HR groups call the mechanism inaccurate and inefficient, warning that it could cause hiring gridlock.

The amendment would have limited verification to new hires, rather than extend it to existing workers, as the underlying bill did.

The fact that easing the language could have caused a firestorm demonstrates the support for enhancing work-site enforcement. There’s a chance verification may resurface in other bills.

But that scenario is not likely, according to sources on and off Capitol Hill.

“The general consensus is that employer verification and modifying the employer sanctions program has to occur within the context of comprehensive immigration reform,” says Mike Aitken, director of government relations for the Society for Human Resource Management.

It may also be difficult to address immigration of highly skilled workers outside of a comprehensive measure.

“It’s been held as a bargaining chip for getting the harder parts of immigration reform done,” says Tod Loofbourrow, CEO of Authoria, a talent management software company. “It needs to move whether it’s separate or together [with other reforms].”

Advocates like Loofbourrow assert that U.S. high-tech companies desperately need to hire the foreign students who come to this country to earn science, technology, engineering and math degrees.

They point to a recent decision by Microsoft to open a software-development center in Canada so it can recruit talent that can’t stay in the U.S. under existing immigration rules.

The Senate bill would have raised the annual H-1B ceiling to 180,000 visas from the current 65,000 limit. Those slots were filled this year on the first day that the government accepted visa applications.

“If we don’t do anything, you’re going to see efforts to move operations overseas,” says Robert Hoffman, vice president of government and public affairs for Oracle. “It’s not an issue of whether we can hire [highly skilled foreign workers], but where we can hire them.”

Hoffman says that message resonates on Capitol Hill. He heads an interest group called Compete America that is lobbying lawmakers for H-1B reform.

“They understand the urgency for action,” he says. “It’s really a question of what’s doable this year.”

If attention returns to the H-1B issue, its supporters likely will have to battle congressional skeptics who will insist on proof that there are no U.S. workers available for the jobs that companies are seeking to fill with the visas.

On the verification side, challenges are emerging outside of Washington. Arizona, Colorado, Oklahoma and Georgia have approved immigration laws mandating that their employers use the government’s electronic system.

Such moves worry business. “We believe that immigration law is a federal issue and belongs at that level,” Aitken says.

—Mark Schoeff Jr.

One of the goals of major pension reform legislation Congress approved last year was to get more Americans to save for retirement by allowing companies to automatically enroll employees in 401(k) plans.

But that didn’t help the estimated 75 million people who work for employers who don’t offer retirement benefits. Bills recently introduced in the House and Senate attempt to fill the gap.

The legislation requires companies with 10 or more employees to offer workers an automatic payroll deduction into an individual retirement account. Employers do not have to match employee contributions, and tax credits offset administrative costs. Employees can opt out of the plans if they wish.

“The unfinished business of the Pension Protection Act is the half of our workforce that doesn’t have a retirement plan,” says J. Mark Iwry, a nonresident senior fellow at the Brookings Institution in Washington and a former benefits tax counsel at the Treasury Department.

The idea has drawn bipartisan support in both houses of Congress. Sens. Jeff Bingaman, D-New Mexico, and Gordon Smith, R-Oregon, and Reps. Richard Neal, D-Massachusetts, and Phil English, R-Pennsylvania, are championing similar bills. Hearings could begin in the House this summer.

Support for legislation that spans Capitol Hill has been rare this year. Bills passed with gusto by the House tend to halt in the Senate.

But the atmosphere may be different for the automatic IRA measure, which also has united disparate think tanks like the liberal Brookings Institution and the conservative Heritage Foundation. AARP also is on board.

The proposal will avoid the political shoals that sunk President Bush’s idea to establish private Social Security accounts, Neal says.

“We’re adding on to Social Security, as opposed to subtracting something from it,” he says. “Not only is there going to be common ground between the two chambers, there’s going to be broad bipartisanship.”

Advocates stress that implementing IRA deductions won’t pose a burden on employers. It would just be another line item on the payroll.

“We haven’t gotten any serious opposition to this,” Bingaman says. “It’s not a major additional responsibility.”

The bill is a modest first step in encouraging companies to establish their own retirement benefits for employees, according to proponents. The hope is that the automatic IRA makes employers comfortable with payroll deductions and will lead to 401(k) plans.

“We regard the automatic IRA as a way of getting started,” says David John, senior research fellow at the Heritage Foundation.

It’s not just companies that will embark on the retirement savings path, but also employees. Pierre Randolph, a build­ing engineer at an apartment complex in Washington, says he is grateful that his employer, Borger Management, implemented an automatic IRA deduction 10 years ago.

Randolph, 44, has been able to save nearly $30,000 for retirement while two of his children have gone to college. A third one is about to enter.

Without IRA access, “I wouldn’t have had the opportunity to put this money away,” he says.

He encourages his colleagues to take advantage of an IRA. “There’s nothing to think about,” he says he tells them. “Your children are getting older and so are you.”

Mark Schoeff Jr.

Victims of domestic violence can take up to three days’ leave from work under legislation that went into effect July 1 in Florida.

The legislation permits employees to take the leave in any 12-month period in order to take action in response to becoming a domestic violence victim, such as obtaining an injunction for protection or obtaining medical care or mental health counseling.

The law applies to employers with 50 or more employees and to employees who have been at the job three or more months.

Before receiving the leave, the employee must first exhaust all annual or vacation, personal and sick leave unless the employer waives the requirement, the law says. The leave may be with or without pay, at the employer’s discretion.

Except in cases of imminent danger, the employee must provide the employer with “appropriate” advance notice and sufficient documentation of domestic violence, according to the law.

The law also prohibits employers from discriminating against employees for exercising their rights under the law.

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

A small but growing number of employers charge smokers more for their health care than they do for nonsmokers. But as evidence continues to link unhealthy lifestyle choices to health care costs and lost productivity, another question arises: Are obese workers next?

If you ask employees, the answer is a “maybe.” In a recent survey by the National Business Group on Health, 65 percent of 1,619 employees at large companies said they believe smokers should be charged more for health care than nonsmokers. About 49 percent surveyed said they would support higher premiums for obese workers.

Smokers at JPMorgan Chase have for years been charged more for health care than nonsmokers. A smoker in New York with a plan through UnitedHealthcare pays about $85 every two weeks, compared with a discounted rate of $70 for nonsmokers. The policy is meant to encourage smokers to take cessation programs and receive the discounted fee, says Wayne N. Burton, JPMorgan’s corporate medical director.

“This motivates them to quit,” he says.

But Burton is doubtful that such a program for obese workers would pass legal muster. Federal HIPAA guidelines prohibit differentiating premiums based on medical conditions, with the exception of smoking. Employers can offer discounts to nonsmokers, as in the case of JPMorgan, if they offer smokers programs to help them quit.

“I can assure you there are no plans to do it outside of smoking at this time,” Burton says.

Part of the problem may be cultural. Smoking is no longer as widely accepted as it once was.

“Everyone is willing to penalize smokers,” says D.W. Eddington, director of the Health Management Research Center at the University of Michigan. “[Employees and employers are] not willing to penalize overweight people, but everyone is willing to penalize smokers because smokers irritate people even from six feet away.”

Some recognize the slippery slope that may result if more employers differentiate their premiums between smokers and nonsmokers.

“Where do you draw the line?” says Edward Kaplan a consultant with the Segal Co. “In closed circles, clients ask me if we should rate premiums based on income, BMI [body mass index used to gauge obesity] and whether they smoke.”

But, he adds, employers are usually chastened by any legal implications and possible bad publicity.

More likely, these experts say, are programs that try to use incentives to get people to change behavior. It’s possible, though, that as employee attitudes begin to shift, so will employers’ willingness to charge unhealthy people higher premiums.

“There’s a lot of momentum around individualized health plans and more accountability within the population,” says Kaplan, “so maybe we’ll see more of it.”

Tell us what you think. Discuss this article in the Workforce Management Community Center or e-mail your comments to editors@workforce.com

—Jeremy Smerd

Members of the two largest unions representing General Electric Co. employees have ratified a new contract that improves health care benefits for employees but will eliminate coverage that supplements Medicare for future retirees, the company and the unions said.

Seventy-nine percent of the voting members of the International Union of Electrical, Salaried, Machine and Furniture Workers-Communications Workers of America and the United Electrical Radio and Machine Workers of America approved the deal, the unions said in a statement late last month.

The new contract’s terms will be extended to nine other unions that have local contracts with GE and will affect about 20,000 workers nationwide, according to a GE statement.

The contract includes added coverage for preventive care—such as routine checkups, vaccinations and screenings—and increases outpatient mental health visits from 30 to 45 per year. New coverage was also created for a halfway house to treat mental health and substance abuse. The medical lifetime maximum benefit was increased from $2.5 million to $3 million per worker.

The contract also boosts dental coverage, enlarging both the restorative and prosthodontic allowance (from $2,000 to $2,500 per two years) and the orthodontic lifetime maximum (from $2,000 to $2,500).

The new agreement, though, raises employee premium contributions for health insurance. The proportion paid by workers, now between 18 percent and 19 percent, will rise to 20.5 percent for individual and family coverage, according to a union spokeswoman.

Additionally, GE will no longer provide health insurance for retirees eligible for Medicare. This change will apply to employees hired after December 31, according to the contract.

The employee co-payment for a brand-name prescription drug obtained through a retail pharmacy will be increased to $22 from $16 and to $50 for brand-name prescriptions obtained through mail order. The annual prescription drug out-of-pocket maximum increases by 12.5 percent, to $2,250 for individual coverage and $4,500 for family coverage, according to the contract.

Eligible retirees and surviving spouses stand to receive a larger pension based on their year of retirement and length of employment. The biggest increases will be given to those who have been retired the longest and will take effect in December, according to the contract.

Additionally, employees will contribute 3 percent of pay—after the first $70,000 of compensation—toward their pension benefits. This change will begin in 2008. Under the expired agreement, contributions were applied on compensation above $60,000.

The new contract is retroactive to June 18 of this year and will remain in effect until June 19, 2011.

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

Defined-contribution plan executives are beefing up disclosure to participants about plan fees well ahead of regulatory guidance expected by the end of the year.

Duke Energy, American Electric Power and Allete Inc. are taking steps to enhance disclosures on fees, prompted by last year’s enactment of the Pension Protection Act, which sets new disclosure and funding requirements for private plans. The Department of Labor is expected to issue guidance clarifying fee disclosure requirements later this year.

“The DOL guidance will impact all employers. Even if they’re not subject to [federal pension law], they will try to follow the guidelines. You will see changes made in the corporate and public markets ahead of the guidance,” says Bill McClain, principal at Mercer Human Resource Consulting.

Officials at Duke Energy are reviewing their 401(k) plans’ fee structure in light of the company’s April 2006 acquisition of Cinergy Energy Solutions, as well as the pension law mandates, says Sherry Love, assistant treasurer. Duke Energy has yet to decide whether it will merge Cinergy’s 401(k) plans into its own 401(k) plan.

“We knew we needed to look into [fees] after the acquisition, and with the PPA and the various lawsuits, it became a higher priority,” Love says.

In October, participants filed lawsuits against corporate sponsors of several large 401(k) plans alleging the companies failed to monitor and disclose fees under so-called revenue-sharing arrangements.

Duke Energy, which has $2.3 billion in 401(k) assets, employs a separate account structure, while Cinergy used retail mutual funds for its $1.1 billion in 401(k) assets, Love says.

Plan officials want to simplify how fees are communicated, he adds.

“We have a proposal for a new structure for investment options for all employees,” Love says. “As a result of the PPA, there’s no question that Duke will provide full disclosure of fees.”

He declined to give details on the new structure and would not disclose names of managers.

McClain said plan executives should consider incorporating education on plan fees into current communications so participants have some background on any new information that might be required by the upcoming guidance.

William Schneider, managing director of DiMeo Schneider & Associates, said plan executives have approached his firm for assistance on what to disclose. The PPA is driving plan sponsors to act now, he said.

Patrick Cutshall, retirement fund manager for Allete’s $300 million 401(k) plan, said that while the company has always tried to stay on top of fees, executives have become more aggressive because of the PPA.

“We have always known what the fees are that we pay. As for participants, we struggle to get them to participate, and that is a challenge in itself. The PPA has changed that focus,” Cutshall says.

“We’ve become really aggressive on where all the fees are paid and communicating that. It is now all put together into a report that participants can see,” he says. Allete, which offers participants 13 investment options, now includes information on operating fees as well as the previously disclosed revenue-sharing fees.

Debate regarding proper fee disclosure has stepped up in recent months.

A congressional hearing led by Rep. George Miller, D-California, chairman of the House Education and Labor Committee, resulted in calls for greater fee disclosure, while the Labor Department said it will issue guidance later this year, and the Securities and Exchange Commission said it will seek to require improved disclosure by mutual funds.

Additionally, the recent lawsuits against major employers—including Lockheed Martin, United Technologies and Northrop Grumman—allege that current fee disclosure is inadequate and that participants lack sufficient information to make appropriate investment decisions.

McClain said Mercer is working with a number of clients on improving disclosure, but he declined to provide names.

“We try to piggyback what they’re getting from their provider. We try to find ways we can help,” he says.

McClain said that despite uncertainty about the content of new fee disclosure requirements, plan executives can begin preparing now.

To start, plan executives should make sure they understand their current fee and revenue-sharing arrangements, including hard-dollar fees, asset-based fees and expenses such as trading costs, McClain said.

Plan executives should know where they stand “by documenting fees from all sources and then benchmarking those fees against the current marketplace,” he says. They should also make sure the monitoring and oversight processes of plan fees are thorough and up to date, including documentation of fees paid from plan assets and efforts to review and reduce fees, he added.

McClain said there is concern from plan sponsors that additional disclosure might deter employees from participating in defined-contribution plans, if it makes the plans look too expensive.

“The biggest challenge is two major costs—the investment costs and the administrative costs,” McClain says. “Almost all plans these days are in a bundled or quasi-bundled arrangement, and these two expenses are intertwined.”

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

Companies that provide “lavish” executive benefits would also have to provide defined-benefit pensions for all employees under a bill introduced Thursday, June 29.

“At a time when employees’ retirement security is anything but secure, things are looking rosy in the corporate board room, where our nation’s corporate elite make sure that they have pensions, higher incomes and other benefits so generous that Midas would have been embarrassed,” said Sen. Tom Harkin, D-Iowa, who proposed the bill, in a statement.

Despite rising corporate profits in recent years, many workers have had their pensions frozen, the statement said.

Many companies have said they cannot afford pensions while at the same time awarding top executives lucrative non-pension benefits that function much like pensions, the statement continued.

The legislation would also create an Office of Pension Participant Advocacy in the Department of Labor that would develop recommendations to improve pension policies and give technical assistance to plan sponsors about their obligations to pension plan participants.

People who retired before companies cut back on pension benefits would be shielded from cuts under the bill.

Companies that change ownership would not be able to revoke employees’ pension benefits, as is currently the case, under another provision of the bill.

Pension beneficiaries who received overpayments by mistake would be allowed to keep them if it would be a hardship for them to repay them under the legislation as well.

Filed by Sara Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

In most situations, the Family and Medical Leave Act is working well and is providing valuable benefits to employees, according to a Department of Labor report released Wednesday, June 27.

The report, based on more than 15,000 comments the DOL received, said that sections of the 1993 law that allow employees to take blocks of unpaid leave for the birth or adoption of a child or because the employee or an immediate family member has a serious health care condition, “appears to be working as anticipated and intended, and working very successfully.”

In those areas, the DOL report said there is “near unanimity” among those filing comments that the FMLA is beneficial to employers and employees.

However, there is considerable tension between employers and employees in the use of unscheduled intermittent leave. “This is the single most serious area of friction between employers and employees seeking to use FMLA leave,” the report said.

While many employers used words such as “abuse and misuse” to describe employee use of unscheduled intermittent leave, the DOL said it could not assess how much of that category of leave-taking is actual abuse and how much is legitimate.

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