Author: Site Staff

When it comes to worker training programs, the Bush administration takes with one hand and gives with another, creating a duality that draws both criticism and praise.

Policy aside, the key challenge for government is to convince corporate America that federal initiatives can be viable sources of talent.

In his fiscal year 2008 budget, President Bush seeks to cut job training programs by about $1 billion. He is proposing vouchers, or “career advancement accounts,” for displaced workers that would give them $3,000 annually for two years to spend on education and training.

The goal is to provide more flexibility and choice for more people than is currently allowed in the federal training structure, according to the administration.

“In the past, we’ve had duplicative systems that have arisen over time,” Labor Secretary Elaine Chao said at a press briefing in February. “I’m challenging the system to do better because people who are out of work are depending on us.”

The career accounts—as well as the Labor Department budget—would have to be approved by Congress. House hearings on the legislation that encompasses training programs, the Workforce Investment Act, may take place in late March or April.

The Senate approved workforce legislation last year, but the full Congress has not passed a bill that formally reauthorizes the 1998 law. For the past three years, Congress has appropriated money to programs established under the original legislation.

While Congress dallies, the administration approach to workforce training is taking fire. The Bush policy is misguided because it would cut funds and require individuals to find their own way through the training maze, according to Tom Kochan, co-director of the Institute for Work and Employment Research at the Massachusetts Institute of Technology.

A better idea, he says, is to link funding to industries and institutions that can leverage private-sector investment and give workers general skills that enable them to plug into existing job demand.

“These people have to be embedded in networks,” Kochan says. “We’re not investing [enough] and we’re not spending our money wisely on everything we know [that] works in employment and training programs.”

Like many other experts and practitioners, however, Kochan endorses the Workforce Innovation in Regional Economic Development Initiative, known by the acronym WIRED. The program is a major Labor Department effort to foster regional economic development by bringing together local government, business and academia to train workers for emerging industries. During the past year, WIRED has invested $260 million in 26 regions throughout the country.

Kochan advocates linking funding for community colleges and universities to their willingness to work with businesses and government.

“That is the kind of networks we need,” Kochan says. “We should be doing this in all our localities.”

Before the practice becomes ubiquitous, businesses have to look to the federal workforce system as a reliable supplier of talent—something that has not happened widely in part because government programs are perceived to be cumbersome and targeted at low-skill workers.

“To effectively engage employers, we need to be able to address their training and hiring needs at all levels and eliminate the bureaucracy they face when they try to access training programs,” says Julian Alssid, executive director of the Workforce Strategy Center.

With local workforce boards, politics sometimes goes along with the training. Appointed by local officials, they tend to protect their turf. For that reason, it would be impossible to merge boards from multiple counties, according to Ross Jackson, a research associate at the University of Memphis and a member of the National Association of Workforce Boards.

He says it’s too early to tell whether WIRED works, but he supports providing incentives for cooperation.

“That will work because economic development today is regional and employment is regional,” he says.

Companies, however, don’t care about local political machinations.

“All they want to know is that people are trained to their standards,” Alssid says.

One place where that is happening is in southeast Michigan. The regional Chamber of Commerce is encouraging auto manufacturers and suppliers to partner with community colleges and government agencies under a WIRED grant to spur economic revival.

Traditional workforce investment involves using federal money to hire a single training vendor. The WIRED prescription encourages teamwork.

“It has been very progressive,” says Jim Jacobs, director of the Center for Workforce Development and Policy at Macomb Community College in Warren, Michigan. “Everyone can win or play a role.”

Some of the biggest entities on the stage are community colleges. With their emphasis on adult education and connections to local business, they have become the primary source of training in a country that lacks a workforce strategy, Jacobs says.

“Community colleges are the national workforce institutions,” he says. “They are on the front lines.”

Local workforce boards also are trying to assert themselves in nurturing talent by demonstrating that they can save businesses money on recruiting and retention.

John Kraczkowski, director of business services for the Workforce Development Board of the Treasure Coast in Port St. Lucie, Florida, says that his organization is adept at plugging into local firms to determine their talent needs.

It won an innovation award from the National Association of Workforce Boards for putting a one-stop federal employment center on the premises of Aegis Communications Group, a local telemarketing firm that employs 700 people.

In the partnership, Aegis provides office space and a receptionist while the workforce system supplies an on-site career counselor and recruitment resources.

The arrangement saved Aegis $750,000 in recruiting costs in its first year of operation, according to Kraczkowski, while reducing turnover by half. The government center has reduced its cost per placement by 67 percent.

“Everyone’s won from it,” Kraczkowski says. “Workforce boards are excellent at having relationships with businesses in the community.”

On a wider playing field, creating similar kinds of business engagement is crucial for the WIRED program. The Labor Department wants the private sector to view cooperation with government and academia as an avenue for finding talent.

“All of us have been striving to expand and enhance the relevance of this system to the regional economy and the larger economy in globalization,” says Emily Stover DeRocco, assistant secretary of labor for employment and training.

Progress is being made, albeit sometimes slowly.

“For all of us, it’s been a journey of learning, which is continuing,” DeRocco says. “Reforms coupled with these investments can get us there.”

Mark Schoeff Jr.

 

A British law that allows shareholders a nonbinding vote on executive compensation has helped to curb excessive CEO pay and better link remuneration to performance, according to experts who testified Thursday, March 8, before a House committee.

The British practice, in place since 2003, is similar to one outlined in a bill introduced by House Financial Services Committee Chairman Barney Frank, D-Massachusetts. Frank’s measure was the centerpiece of the March 8 hearing.

Under Frank’s proposal, public companies would be required to give shareholders an annual nonbinding advisory vote on executive compensation plans. It also would ensure a nonbinding vote on a “golden parachute” package if one is awarded while the company is being sold.

In Britain, such an approach has been a success, according to Stephen Davis, a fellow at the Millstein Center for Corporate Governance and Performance at the Yale School of Management. Davis’ organization studied the U.K. system.

“Advisory votes on executive pay policies are rational, timely, road-tested and practical for use in the United States,” Davis testified before the House committee.

Shareholder voting on compensation has resulted in “taming the rate of increase, curbing opportunities for ‘pay for failure,’ and linking compensation dramatically closer to performance,” Davis says.

A representative of the U.S. business community, however, warned that shareholder voting could undermine corporate governance by fostering proxy wars and distracting directors from other critical responsibilities.

John Castellani, president of the Business Roundtable, says he favors improved disclosure of executive pay. But the level of compensation should be set by corporate boards.

A 2006 survey of the Business Roundtable’s membership found that 85 percent of company boards are composed of at least 80 percent independent directors, who are elected by shareholders and act on their behalf.

“Corporations were never designed to be democracies,” he says. “While shareholders own a corporation, they don’t run it.”

Davis argued that a nonbinding advisory vote provides “shareholders tools they need to act as real owners of the corporation.”

Shareholders are getting more information on CEO pay thanks to enhanced disclosure rules promulgated last year by the Securities Exchange Commission. But transparency alone is not sufficient, according to one witness.

Reforming pay structures “depends on information and the ability to respond,” says Nell Minow, editor of the Corporate Library, a governance watchdog organization. A mechanism like advisory voting enables shareholders to align salaries with performance.

A survey by Minow’s organization of 1,400 CEOs showed that their median total compensation was $13.51 million in fiscal year 2005, up 16 percent over 2004.

But Steven Kaplan, a professor at the University of Chicago Graduate School of Business, said most CEOs are not overpaid and are judged by their firms’ performance.

He said the median salary for the boss of an S&P 500 company with more than 20,000 workers was $8 million.

One problem, Kaplan says, is that the best corporate leaders are opting to ditch shareholder hassles for the riches of the private equity world. The Frank measure would be another straw on the camel’s back.

“On the margin, the bill would reduce the attractiveness of being a public-company CEO,” Kaplan says. “Good CEOs and CFOs say, ‘I’d rather be doing something else.’ ”

Enhancing a CEO’s career path isn’t as important as addressing the yawning disparity between executive compensation and pay for other workers, a situation that undermines confidence in the economy, says Rep. David Scott, D-Georgia.

“I am concerned that executive pay has become dangerously outsized,” he says.

The Frank bill is a good response. “This is a modest, common-sense approach to dealing with a very serious issue that is threatening the fabric of our economic system,” Scott says.

At the March 8 hearing, Republicans were skeptical about the bill. They voiced concerns about government trying to influence business decisions and worried that shareholder voting on executive compensation would lead to direct voting on other aspects of company operations.

Frank has scheduled a March 21 committee vote on the bill. That will provide another opportunity for Capitol Hill comment on executive salaries—an issue that’s building momentum, Minow says.

“It’s quite clear that there is a tremendous amount of support for doing something about CEO pay,” she says.

—Mark Schoeff Jr.

Doctors in medical clinics at employer work sites are three times more likely to get employees with chronic illnesses enrolled in disease management programs than the telephone counselors most programs rely on, a new study shows.

The findings, published last week in the Journal of Disease Management, give added weight to the growing interest by large employers in having primary care clinics in the workplace.

The study was conducted by CHD Meridian Healthcare, based in Chadds Ford, Pennsylvania, at a health clinic the company operates at a Goodyear Tire & Rubber Co. plant in Gadsden, Alabama. CHD Meridian identified 1,815 employees with diabetes, hypertension or coronary heart disease as being potential participants in a disease management pro- gram. Seventy-six percent of eligible patients who were encouraged during meetings with their doctor at work-site clinics enrolled in the disease management program, compared with an industry average of around 25 percent, says Raymond Fabius, president and chief medical officer of CHD Meridian Health­care and one of the study’s authors.

“Traditional disease management programs have depended on anonymous, albeit very well-meaning, nurse case managers making telephone calls to patients, often independent of their trusted clinicians,” Fabius says. “Our key finding showed the remarkable power that a trusted primary care clinician has on effecting behavior change.”

Employers have taken a renewed interest in disease management programs in hopes that by detecting and managing chronic illnesses they will improve the health of their employees and reduce long-term medical costs. Disease management companies use computer modeling programs and health risk assessments to identify at-risk patients. Most rely on over-the-phone counseling to enroll patients.

The study suggests that doctors at work-site clinics do a better job.

“When you place the trusted clinician in the workplace and you capture the majority of the covered population, it’s much easier to drive a wellness or disease management program because you [the employer] are only dealing with one doctor’s office,” Fabius says.

Doctors who are spread throughout the community often must divide their time among different patient populations, health insurance companies and various disease management programs.

Another issue is economics. Insurance companies pay doctors a fixed rate for each patient visit, regardless of whether the visit lasts five minutes or 50. Face-to-face counseling, often the most important way to change patient behavior, is the first thing to be sacrificed, doctors say.

But not every employer needs to build a work-site clinic to get those results, says Dexter Shurney, chief medical officer for Healthways, a disease management company based in Nashville, Tennessee. Shurney says Healthways enrolls 90 percent of eligible patients into disease management programs through its telephone counseling services.

“A number of models can work as long as you establish that level of trust,” Shur­ney says. “Companies need to think about leveraging the kinds of things they already have in place” before investing in a work-site clinic.

Fabius estimates a company would need 1,500 employees at one work site to support one physician’s practice.

—Jeremy Smerd

 

After an initial hearing on 401(k) fees, the chairman of a House committee says he is inclined to offer legislation that would require plan sponsors to provide greater disclosure about charges related to the retirement products.

Rep. George Miller, D-California, chairman of the House Education and Labor Committee, convened the hearing Tuesday, March 6, to explore what he says are hidden fees that erode the retirement savings of middle-class Americans.

“There’s general agreement, both with the industry and certainly on this committee, that there are some serious problems with transparency, with possibly conflicted relationships, and with understandable language [in prospectuses] for plan participants,” Miller told reporters after the hearing.

He says that he doesn’t have a timetable for a bill, but asserted that something should be done.

“Inaction is probably not an option for the committee,” he says. Miller plans to schedule more 401(k) hearings during the next few weeks.

Following the March 6 meeting, the Department of Labor tried to demonstrate that it is moving on the 401(k) fee issue. In a statement, it said that it is planning to publish this spring a proposed regulation to require service providers to disclose their compensation, fees and other financial arrangements.

The department also said it will soon publish a request for information seeking public comments on how to improve fee disclosure. Last year, it expanded the public disclosure of fee and expense information on Form 5500 annual reports.

The DOL’s efforts notwithstanding, Miller is convinced that middle-income families are suffering retirement income losses thanks to fees they don’t see or understand.

Miller commissioned a study released by the Government Accountability Office in November stating that opaque fee structures hurt participants. The agency said that a 1 percentage point difference in annual costs for a $20,000 401(k) account over 20 years can result in a 17 percent difference in accumulated savings.

Such losses could be devastating to a retirement nest egg, Miller contends.

“A lot of middle Americans struggle every month to make this contribution,” he says.

Inscrutable fees and conflicts of interest with service providers amount to a situation in which “you have a lot of people dipping into other people’s money,” Miller says.

An industry expert cautions that Congress must be careful in defining what kind of information to provide and how much—considering there are dozens of different kinds of fees.

“It is important to make sure that the cost of doing this does not overwhelm the benefit that comes from it,” says Robert Chambers, a partner at Helms Mulliss Wicker in Charlotte, North Carolina, and chairman of the American Benefits Council.

Chambers favors greater fee disclosure but said it should be done in a way that doesn’t create burdens for plan sponsors or scare investors. He said that fees should be related to the quality of the investment product.

“The reasonableness of a fee is based on what you get for it,” he said.

But another expert argues that hidden fees make it difficult for CFOs to assure workers that they are not being hurt by excessive costs.

“The industry must not impede the fiduciary,” says Matthew Hutcheson, plan architect at G Fiduciary in Tualatin, Oregon. “If we held everyone to a fiduciary standard, this might self-correct.”

Misleading and obscure information is the rule, not the exception, when it comes to 401(k) costs, according to Hutcheson.

“It’s pervasive,” he says.

One example of an effort to increase fees, according to Hutcheson, occurs when a record keeper is paid based on the number of funds in which money is invested. Instead of spreading assets among four or five funds, the money may be put in eight or more.

In its report, the GAO suggested two legislative remedies. The agency said Congress should consider amending the retirement savings law to require that all plan sponsors disclose fee information in a way that facilities consumer comparisons of investment options. The GAO also recommended that Congress should consider amending the retirement law so 401(k) service providers disclose to plan sponsors compensation they receive from other service providers.

When it comes to legislation, however, the senior Republican on the House committee urged a measured pace.

“We must resist the urge to simply overload workers with information—or worse, to mandate the distribution of out-of-context information that may lead participants to make poor investment choices,” says Rep. Howard “Buck” McKeon, R-California.

Overall, the hearing was less of a grilling of the 401(k) industry than a lively discussion.

“There was a general sense of people wanting to understand the issue and come to a good conclusion,” says Ann Combs, a principal at Vanguard and former assistant secretary of labor for the Employee Benefits Security Administration.

—Mark Schoeff Jr.

 

Maybe 401(k) plans can be dragged into the world of modern portfolio theory after all.

At least that’s the hope of observers who contend the automation of 401(k)s promoted by last year’s pension law will bring about a drastic change in the way defined-contribution plan assets are invested.

As companies automatically enroll more workers in 401(k) plans’ default investments, observers say, the current system in which participants make their own investment decisions will be replaced by one in which the majority of 401(k) assets are professionally managed.

Boston College found that between 1988 and 2004, the overall returns on defined-benefit plan assets beat those of 401(k) plans by about one percentage point and attributed the 401(k) shortfall to participants’ “poor timing and investment mistakes.”

At a minimum, the new default investments will ensure that participants are diversified. The Center for Retirement Research report found that nearly 50 percent of 401(k) accounts were not diversified, with some participants having little or nothing in stocks and others investing only in them. The report concluded that using default investments that provide diversification should “significantly improve the performance of 401(k) plans.”

But compared with the investments that companies currently use as defaults, like stable-value and money market funds, the new default investments are more aggressive and more volatile. Are companies that sponsor 401(k) plans ready for the change?

The three types of investments that the Department of Labor proposed as defaults last fall are lifecycle funds, balanced funds and managed accounts. Consultants say plan sponsors’ interest seems centered on lifecycle funds, also known as target-date retirement funds, which invest in a manner appropriate for an employee planning to retire around the date specified in the fund’s title.

Lifecycle funds are “more aggressive compared with, say, money-market defaults of the past,” says Mark Ruloff, director of asset allocation for Watson Wyatt Investment Consulting, adding that money market defaults were not very good investments in the first place.

The new defaults “have better expected returns, but they also will have more volatility than the money market strategy,” he says.

He added that the lifecycle funds’ approach is basically an effort to deal with 401(k) participants’ shortcomings as savers: “The lifecycle funds are trying to compensate for [participants’] overspending and under-saving and long life by taking on more aggressive investment strategies.”

As lifecycle funds take over the task of investing participants’ savings, they are going beyond the stock and bond funds that make up the bulk of choices in 401(k) plans to add more sophisticated options, ranging from emerging-markets securities and high-yield bonds to real estate.

Donald Stone, president of Plan Sponsor Advisors, says some lifecycle funds already use “one or two or even more asset classes that you don’t see often in a core [401(k)] menu.”

He cited TIPS, high-yield bonds, emerging markets and even real estate. “Emerging markets is not anything you see on core investment menus.” And while some 401(k) plans offer real estate as an option, Stone said it is showing up more often in lifecycle funds.

Adding different types of investments, especially those whose performance tends to have a low correlation to the performance of traditional investments, “can in fact enhance returns and mitigate risks,” he says. “Real estate is a really good example of that. It tends to dampen volatility and [over time] has enhanced returns as well.”

Ruloff says that putting alternative investments on a 401(k) investment menu has different ramifications than putting them in a lifecycle fund.

If investors could stash all their retirement money in emerging-market funds, they could see volatility like last week’s 9 percent sell-off in the Chinese stock market. But using a broad range of investments within a lifecycle fund “actually provides the opportunity to have less [overall] volatility,” Ruloff says.

If companies are concerned about the level of risk or volatility of lifecycle funds, the third type of proposed default, professionally managed accounts, may seem like a safer bet, since managed account providers divide participants’ assets among investments already in the 401(k) plan.

“The nice thing with managed accounts is you know exactly what’s being used,” says Jeff Maggioncalda, president and CEO of Financial Engines, a managed account and advice provider.

The shift toward a defined-benefit style of investing in 401(k) plans includes a change in the way goals are framed. Instead of the traditional focus on the total amount a participant has saved, plan providers and the companies sponsoring plans are beginning to consider how those assets will translate into retirement income.

“It’s not so much your balance, but if you’re on track to have the income you need,” Stone says. “That’s a very DB concept.”

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

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Dear Shifting Gears:



The link between performance management and merit scores remains a fuzzy proposition and will continue to be, unless performance goals are adjusted to match the individual goals of each employee. You also need to track this successfully–a major problem for most organizations.

Factor in subjective ratings issues, such as employee attitudes and other personality factors favored by employers, and it’s easy to see how these competing criteria can create a recipe for failure.

Compensation experts for years have preached that discussions on performance with employees should not be linked to pay discussions, although most companies ignore this advice.

I am not a fan of using employees’ performance ratings or scores as a basis for pay decisions. Employees should know at all times how well they are performing and also need to see periodic adjustments to their base pay that keeps wages in line with their peers in the marketplace (we are not talking about a cost-of-living adjustment, though).

In addition, your pay programs should focus on company-established business goals and the professional development of employees by improving their skill sets. Pay programs that fit into this category include gain-sharing, profit-sharing, skills-based pay and milestone pay (common in project work), as well as other custom programs that emphasize sharing financial success with all or most employees based on meeting certain milestones.

Design your pay programs with a view to supporting the company’s business goals. Also, be sure they are linked throughout the company, so that whichever goals the executive team is rewarded for are the same goals for which receptionists and others are rewarded as well.

SOURCE: Dick Dauphinais, the Herman Group, Greensboro, North Carolina, April 20, 2006.

LEARN MORE: Please read Retooling Pay to see how companies in old-line industries are turning to performance-based pay and incentives. Of similar interest is A New Way to Pay.

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

With their takeover of Congress, Democrats have vowed to scrutinize the Bush administration much more carefully than they claim that Republicans did when they were in charge.

Congressional review won’t just apply to government agencies, it also will hit the private sector-and the retirement finance industry will be one of the first under the microscope, according to James Delaplane, a partner at the Washington law firm Davis & Harman.

Sometime in March, the House Education and Labor Committee likely will launch hearings on 401(k) fees. The impetus is a November report by the Government Accountability Office that called for greater transparency in fees and demonstrated how small cost increases can dramatically curb fund returns.

The report was requested by Rep. George Miller, D-California and chairman of the committee, who worries that hidden fees are eroding the savings of many Americans. Miller’s stewardship of the labor panel will be characterized by a focus on what he says are the economic hardships facing the middle class even in the midst of high corporate profits.

For 401(k) plan sponsors, this could translate into some uncomfortable grill­ing on Capitol Hill.

“They’re going to be a rough set of hearings,” Delaplane told an audience this month at the Pensions & Investments East Coast Defined Contribution Conference in Palm Beach Gardens, Flo­rida. “Hold on to your hats.”

Miller has indicated that he will be a te­nacious watchdog. “The core part of this committee is effective oversight,” he says.

The California lawmaker’s reach will extend beyond the Bush administration. The 401(k) hearings are “an example of stepped-up oversight, not just of government agencies but also of employer programs,” Delaplane says. “He’s an extremely aggressive chairman. He will be the one who defines retirement policy in the House—and it won’t always be pretty.”

An industry advocate argues that a problem with analyzing 401(k) fees is that they are charged for investment management. Parsing the value of the service can depend on how well the fund does, says Mike Barry, president of Plan Advisory Services.

A higher fee may be worth it, if a participant is receiving superior returns for his or her money. Each plan may have unique justifications for why it costs more—or less—than others.

“There’s no way to compare this apple to that apple,” Barry says.

The Department of Labor had been drafting regulations for 401(k) fees before the GAO report was issued. And fees have been the subject of numerous court cases.

Lori Lucas, senior vice president of Callan Associates, says that providers should improve fee analysis and benchmarking. Fees must be reasonable for what the plan provides—a rule that can be amorphous.

“That’s where the art and complexity of this exercise comes into play,” she says.

The 401(k) examination could result in highlighting investment management, record keeping and trustee charges in revenue-sharing agreements. Currently, in such arrangements fees are taken out of profit—and participants may not know they’re being assessed.

“Disclosure is not just about participants making better choices, but participants driving change,” Barry says.

Mark Schoeff Jr.

Legislation that would facilitate unionization passed the House of Representatives on Thursday, March 1. But that may be the measure’s high point, with uncertain Senate prospects and a veto threat from President Bush looming ahead.

The House approved the bill 241-185, with 13 Republicans joining 228 Democrats in supporting the measure, which would permit a union to be formed if a majority of workers sign authorization cards.

Under current law, a company can accept a so-called card-check election or force a secret ballot vote supervised by the National Labor Relations Board.

In addition, the bill would allow a company or a union to refer a first contract dispute to mediation after 90 days and to binding arbitration after 30 days of mediation. It would impose fines up to $20,000 on companies that discriminate against workers during organizing campaigns and force them to pay treble back wages.

The House defeated GOP amendments to allow employees to put themselves on union “do not call” lists and to mandate that elections occur only through secret balloting.

Advocates for the bill argue that it would allow employees to freely form unions without coercion from employers.

“It’s ending intimidation of hardworking Americans … when they simply say, ‘I want a union,’ ” Rep. George Miller, D-California and chairman of the House Education and Labor Committee, said in a press briefing after the vote.

Opponents assert that the measure would subject workers to pressure from unions, who they say have championed the bill as a means to boost their declining numbers.

Earlier in the week, the Bush administration formally announced that the president would veto the bill if it reached his desk.

“The administration opposes any effort to circumvent supervised elections and private balloting,” a policy statement says. “It is a fundamental tenet of democracy that individuals are able to vote their conscience, free from the threat of reprisal.”

Before getting to the president, the bill has to survive the Senate, where it needs 60 votes to avoid a filibuster. A similar bill garnered 45 Senate co-sponsors in the last Congress.

On Thursday, Senate Minority Leader Mitch McConnell, R-Kentucky, made ominous overtures about the House bill. “I can assure you that it will meet a different fate when it gets to the Senate,” he said in a speech.

Miller says that the bill is building momentum that will help it in the Senate because proponents are tasting victory that was impossible during Republican control of Congress.

He and other Democrats cite the unionization measure, along with an increase in the minimum wage, as evidence of their support for the middle class, which has seen pensions disappear and health care costs escalate despite big corporate profits.

“We’re here to make the economy fairer,” House Speaker Nancy Pelosi, D-California, said in the post-vote press conference.

Republicans, however, say Democrats are motivated by politics. They accuse them of promoting the bill as a payback to unions for their support during the 2006 election, when Democrats took control of the House and Senate. Labor contributed $56.7 million to Democratic candidates, according to the Center for Responsive Politics.

“It’s almost beyond my imagination that this bill is on the floor of the House of Representatives taking away the secret ballot election,” said House Minority Leader John Boehner, R-Ohio, during the floor debate. “It’s about upsetting the balance between workers and management. This is an effort to help [unions] get more members.”

The business lobby is putting up a fierce fight against the bill. A U.S. Chamber of Commerce grass-roots campaign has resulted in 40,000 individual contacts with Capitol Hill offices and involves targeted radio ads in many congressional districts.

Some companies, however, have allowed their employees to form unions through the card-check process. Cingular says that doing so has helped it increase employee engagement and improve customer relations.

Miller says that easing unionization establishes a cooperative atmosphere in the workplace “rather than two armed camps.”

“This has exciting potential for forward-thinking, forward-leaning companies,” he says.

—Mark Schoeff Jr.

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

FedEx Corp. has announced that it will freeze its traditional pension plan, expand its cash-balance plan and make improvements to its 401(k) plan.

The $34 billion delivery company said the changes reflect accounting and funding rule changes, the Pension Protection Act’s provisions on cash-balance plans and automating 401(k)s, and shifting demographic trends.

Since last summer’s Pension Protection Act established that cash-balance plans don’t discriminate against older workers, MeadWestvaco said it would convert its traditional pension plan to a cash-balance plan and another company, Phoenix Cos., announced that it would convert its traditional pension plan to a pension-equity plan, another type of hybrid pension plan.

FedEx already had a cash-balance plan, instituted in 2003, in which it enrolled new hires. It had given existing employees the choice of switching to the cash-balance plan or staying in the pension plan. As of June 1, 2008, employees who are still in the traditional pension plan will begin accruing benefits under the cash-balance plan; they will not accrue additional benefits in the traditional plan but will be paid the benefits they have already accrued when they retire.

In line with the Pension Protection Act’s encouragement of automation in 401(k) plans, FedEx also said it will begin to automatically enroll employees in its 401(k) and automatically increase their savings rate each year. It will also add investment options and boost the company match to a maximum of 3.5 percent of an employee’s salary; currently, FedEx matches up to $500.

The company says that it does not expect the changes it is making to alter the amount it spends on employee retirement plans. A FedEx spokesman said the changes in retirement plans apply to 170,000 U.S. employees.

Separately, Goodyear Tire & Rubber Co. announced that it will freeze its defined-benefit pension plans for salaried workers at the end of 2008 and replace them with enhanced 401(k) benefits. At the start of 2009, Goodyear will begin matching 50% of the first 4 percent of pay that employees save in the salaried 401(k) plans.

Goodyear also said that it will redesign its retiree medical benefits, including increasing the contributions that retirees make toward the cost of those benefits.

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

The fates of the two workers’ rights bills that passed a House committee this month could be headed in opposite directions.

The Genetic Information Non-Discrimination Act sailed through the House Education and Labor Committee in about 30 minutes. A Senate counterpart committee approved a companion bill on January 31.

In contrast, the bill that would make workplace organizing easier, the Employee Free Choice Act, took more than seven hours and has drawn a presidential veto threat.

The bill would allow the formation of a union if a majority of workers sign cards authorizing one. Under current law, the so-called card-check process can only be used if an employer agrees to it. A company can insist on a secret ballot.

“It should be the employees’ choice, not employers’, and that’s really what the heart of this bill is all about,” said Rep. George Miller, D-California and chairman of the House labor committee.

Tensions emerged as Democrats defeated, mostly on party-line votes, a dozen GOP amendments—including one that would have mandated that union votes occur only by secret ballot.

Cingular Wireless, Costco, Harley-Davidson and Kaiser Permanente have allowed card-check union formation. Cingular says it has increased employee engagement.

During the hearing, Democrats asserted that unionized workers have higher wages and benefits. If more Americans could join unions, they asserted, it would bolster the middle class. They said secret ballot voting fosters coercion by employers.

Republicans countered that the card-check system would subject workers to intimidation from unions because they would be forced to make their preference known to their co-workers. In addition, they said union politics is driving the Democrats.

“Supporters of this bill see the card check as a silver bullet through which organized labor will reverse their recently sagging fortunes, because relying on the time-honored private votes of workers hasn’t given them the results they’ve sought to maintain power,” says Rep. Howard “Buck” McKeon, ranking Republican on the labor committee.

About 12 percent of the workforce is unionized, a proportion that has been steadily declining.

The bill, which already has 234 co-sponsors, is likely to be approved by the House. Its fate in the Senate, where it has to garner 60 votes in order to avoid a filibuster, is much more uncertain.

Washington that the bill violates workers’ rights to a secret ballot. Business interests also are mounting a fierce campaign to defeat the legislation.

The genetics bill, meanwhile, is cruising along with bipartisan comity. In the House hearing, Republicans praised Democrats for working with them to ensure the bill cannot be used as a federal mandate for insurers and employers to cover genetic-related conditions. Other changes targeted the definition of a family member and record-keeping procedures.

Employer groups have said that the lack of genetic discrimination suits under current state laws demonstrates there is no need for a federal bill. But there is broad support on Capitol Hill for research.

“There is a clear need for us to pass a law to protect genetic information from discriminatory uses,” Miller said. “We all suffer if fears of lost jobs or health insurance stifle these scientific advances.”

—Mark Schoeff Jr.