Author: Site Staff

Dear Education Isn’t Cheap:

Education assistance or tuition reimbursement programs are typically one of the most poorly managed benefits that companies offer. While nearly every company offers a variant of the benefit, few even attempt to evaluate the return on investment (or lack thereof). Such programs rarely have goals, and primarily exist just because everyone else has one. You are right to question what must be done to increase the program ROI, but I assure you that service return contracts are not the answer. Consider asking yourself:

1. Historically what is the percentage of participants in the program who have voluntarily separated following completion or near completion of their education?

2. How has completing the education affected the capability or capacity of the program participants to perform their jobs? In other words, does their on-the-job performance increase? Do they receive promotions more often? Does the quality of their work improve?

3. Historically, how has the organization leveraged the education it sponsored? Was a career plan in place to make use of what the participants were learning? Did the organization re-evaluate the position of the participant or their compensation upon completion of the education (re-recruiting them)?

4. What is the performance profile of the typical program participant? Is this a program that is primarily used by existing top performers, average employees or minimally engaged employees who continuously perform just above minimum performance standards?

The key in maximizing the ROI of this program, or any HR program for that matter, is to:

• Develop and clearly articulate a business reason for the program to exist.
• Cascade that reason down into clearly defined and measurable goals and objectives for the program.
• Establish metrics relevant to each goal/objective.
• Routinely communicate program performance and rigorously investigate/resolve non-ideal results.

Completing a degree or even adding new skills to one’s portfolio increases the person’s perceived market value, if not their actual value. Few organizations manage toward that perception. They do not re-recruit the program participant, placing them into a new position that utilizes their current skills. They do not adjust the compensation to levels that a competitor would now pay. And more often than not, they do not even congratulate the employees on their achievement. If such programs can have a positive ROI, achieving it will require that you manage the program for planned results, not administration.

SOURCE: Dr. John Sullivan, San Francisco State University, July 18, 2006.

LEARN MORE: Here is another article on this topic. Also, an intermediate course on calculating its ROI.

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.

Dear Contrarian:

Research always is a good tool, but you should think carefully about the kind of research you need. We suggest that you first evaluate the firm’s financial situation and consider what can be afforded. Next, determine the impact of the benefits package on retention and recruiting by talking to human resources, including the compensation and benefits staff, to find out what they hear and know about your program from the people they are recruiting. It is crucial to include senior management to determine organizational strategy and goals.

We would suggest two additional approaches to fact-finding—conduct employee focus groups as well as a benchmark survey of companies with which you compete for talent.

The focus group charter can be clearly stated as exploratory in nature. The groups might examine employee understanding of their benefits and what employees value—why they come to work at your organization rather than going across the street—beyond the benefits you offer.

You might position this research as a way to determine whether your employees see the various people policies and programs (your total rewards programs) as linked to their professional and personal growth. The areas to discuss beyond benefits would be affiliation, career, work content and compensation. You might say that the information gathered through the focus groups will be used to define and articulate an employee value proposition for your organization.

In addition to focus groups, conducting a survey of those companies with which you compete for talent, especially when in growth mode, will help senior management decide where you need to be in light of the competition, and how to position yourselves. Benchmarking your company’s offerings against those of the competition is an important step in determining how to position benefits as part of your overall employee value proposition. Do you want to provide benefits that are richer than your competition, in line with the competition, or less rich than the competition? You may want to consider making up for any benefits shortfall in other areas (e.g., compensation, paid time off, richer affiliation, etc.)

It’s always tempting to just call your vendors and ask for a new “package,” but if you really want to align your benefits programs with your organizational goals, it is worth taking the time to do the research, and it’s worth doing the right research.

SOURCE: Nenette Kress, Segal/MGC Communications, New York; John R. Povinelli, Sibson Consulting (a division of Segal), Tempe, Arizona; and Chris Calvert, Sibson Consulting, New York, October 30, 2007.

LEARN MORE: Please read Diagnosing the Workforce to find out how and why companies are gauging the health of their employees.

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.

Dear Bedeviled:

The best-known 1,000-hour rule is contained in Part 2 of Title 1 of the Employee Retirement Income and Security Act of 1974 (ERISA) and generally only applies to employee pension benefit plans. It’s also mentioned in the Internal Revenue Code (IRC) Sections 410(a) and 411(a) regarding participation and vesting in retirement plans.

The concept of 1,000 hours has received attention lately in the Section 403(b) universal availability requirement in the finalpe 403(b) regulations. Under that requirement, employees who are not expected to work at least 20 hours per week need not be offered the opportunity to make salary deferrals.

However, the IRS added that once such an employee works at least 1,000 hours in a year, he or she must become a participant in the following year. As pointed out in the preambles to both the proposed and final regulations, the exclusion for employees who are “expected to work (fewer) than 20 hours” is available only for non-ERISA 403(b) plans.

Although the 1,000-hour rule is best known in retirement circles, it also has some applicability with group welfare plans—generally only with respect to nondiscrimination testing.

Unfortunately, it is not applied on a consistent basis and does not apply to all benefits.

For example, in determining eligibility for nondiscrimination purposes under a dependent-care assistance program under IRC Section 129, employees with less than one year of service (defined with reference to the 1,000-hour requirement of IRC Section 410(a) can be excluded.

Additionally, for similar purposes, under group-term life insurance plans (IRC Section 79) and self-insured group health plans (IRC Section 105(h), employees with less than three years of service can be excluded. The regulations under IRC Section 105(h) state that although other methods can be used to measure service, the 1,000-hour requirement in IRC Section 410(a) would be reasonable.

It is interesting to note that both group-term life insurance plans and self-insured group health plans are permitted to exclude part-time and seasonal employees. IRC Section 105(h) defines a part-time employee as someone whose customary employment is less than 25 hours a week.

As a result, the 1,000-hour rule for such plans may not be an absolute figure. However, any exclusion for “part-time” employees is not an acceptable exclusion for retirement plans.

Group health plans that are insured are generally not subject to nondiscrimination rules, with regard to service requirements, under ERISA or the IRC unless offered through a cafeteria plan.

Other types of benefit programs, such as education assistance programs and adoption expense programs, are also subject to nondiscrimination rules, but those rules are not as well developed as are those for the benefit plans mentioned above.

SOURCE: John Kent Graham, regional director of compliance, Sibson Consulting, New York, February 24, 2009

LEARN MORE: The U.S. Department of Labor provides an FAQ on ERISA that aims to help employees understand the law.

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.