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Obama Backs Pension Funding Relief With Conditions

The Obama administration has endorsed legislative efforts to provide additional funding relief to defined-benefit plan sponsors but only if the relief is targeted to companies that really need it, according to a letter to key lawmakers from Labor Secretary Hilda Solis.


The administration also wants to ensure that funding relief is not available to companies in severe financial distress that are unlikely to meet future plan funding obligations, according to the letter.


Copies of the letter were sent to House Education and Labor Committee Chairman George Miller, D-California, and House Ways and Means Committee Chairman Sander Levin, D-Michigan.


Also according to the letter, the Obama administration wants to ensure that the cash saved by companies through funding relief is put into job creation and preservation—and that cash not needed for those purposes is put into the pension funds before being distributed to shareholders or plowed into pay raises for company executives.


“Finally, the legislation should not provide funding relief to companies that are unlikely to be able to meet their pension obligations in the future because of severe financial distress, such as firms in bankruptcy or those that have failed to make past required pension contributions,” Solis wrote in her letter. “Allowing these companies to reduce their pension contributions creates an unacceptable risk of loss to workers, retirees and the PBGC.”  


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


 


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Employers Refusal to Hire Medical Marijuana User Upheld

In a long-awaited decision, the Oregon Supreme Court has ruled that employers are not required to accommodate employees who use medical marijuana.


The decision dated Wednesday, April 14, and posted online Thursday in Emerald Steel Fabricators Inc. v. Bureau of Labor and Industries involves an employer that refused to hire a temporary worker as a permanent employee after learning he was a medical marijuana user. The Oregon Supreme Court’s 5-2 ruling overturned an appellate court ruling that had been based on technical grounds.


The Oregon Medical Marijuana Act authorizes individuals holding registry identification cards to use marijuana for medical purposes. However, “under Oregon’s employment discrimination laws, [the] employer was not required to accommodate [the] employee’s use of medical marijuana,” the Oregon Supreme Court majority ruled.


The court also concludes that even though the state law authorizes the use of medical marijuana, the federal Controlled Substances Act pre-empts the state law.


Reacting to the ruling, Richard R. Meneghello, a partner with law firm Fisher & Philips in Portland, said the decision is “a comprehensive victory for Oregon employers. It means that employers need not accommodate employees’ use of medical marijuana, and they can now feel confident in consistently applying any zero-tolerance drug policy” they may have.


“This was a decision 10 years in the waiting,” said Meneghello, who was not involved in the case.


Within a couple years of the 1998 passage of Oregon’s medical marijuana law, judges and arbitrators issued pro-employee rulings on the issue that put employers “in a state of uncertainty and we’ve really been living there” ever since, said Meneghello. The decision was “definitely anxiously awaited,” he added.  


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


 


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Early Retiree Health Care Claim Forms Ready in June

The Department of Health and Human Services says reimbursement application forms will be ready in June just prior to the start of a temporary federal program in which the government will partially repay employers for a portion of their retiree health care claims.


Under that program, authorized as part of the massive health care reform measure President Barack Obama signed into law last month, the federal government will pay $5 billion to reimburse employers with health care plans covering early retirees, defined as those between ages 55 and 64. Specifically, the government will reimburse employers 80 percent of each claim between $15,000 and $90,000.


In its fact sheet, HHS says medical, surgical, hospital and prescription costs are eligible for tax-free reimbursement.


However, employers that receive government payments will be required to use the proceeds to lower early retirees’ health care costs, such as by reducing premium contributions, co-payments or deductibles.


Congress allocated $5 billion for the program, which will begin June 23 of this year and end January 1, 2014. However, unless Congress authorizes additional funding, the $5 billion fund is expected to be exhausted quickly.


A fact sheet is available online.


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


 


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Workers Need More Retirement Advice, Survey Finds

While employees are making some strides in preparing for retirement, many are still not receiving enough advice in planning, according to a new MetLife Inc. survey.


Forty-two percent of surveyed employees said they’re confident in their ability to make good decisions on how to manage the money in their 401(k) plans, up from 36 percent in 2008.


And forty-seven percent said they have a retirement plan, compared with 39 percent in 2008.


But while 41 percent of workers indicated they would like to have a financial planner to help them invest their 401(k) savings, just 35 percent of employers said they offer retirement planning sessions.


That said, Bill Raczko, senior vice president for U.S. business and marketing at MetLife, noted that there appeared to be more employers bringing advice programs into the workplace. But he noted that any lingering reluctance is likely based on getting the employer comfortable with the matter of fiduciary duty, rather than the way those planners are being paid.


“The best way to address that [discomfort] is to have the advice provider work closely with the benefit managers,” Raczko said. That cooperation would give employers reassurance that the guidance that workers receive is relevant and that the message that’s being delivered is clear, he added.


MetLife’s eighth annual study of employee benefits trends surveyed about 1,300 workers and 1,500 employers in the fourth quarter of 2009. The study was unveiled at MetLife’s National Benefits Symposium in Washington on Tuesday, April 13. 


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


 


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Senate Nears Final Vote on COBRA Premium Subsidy Extension

The U.S. Senate has agreed to limit debate on legislation to retroactively extend federal COBRA health insurance premium subsidies and certain other expired tax code provisions.


The Senate’s 60-34 vote late Monday, April 12, sets the stage for a final vote on the legislation, H.R. 4851, later this week.


Under the bill that the House already has approved, the 15-month, 65 percent federal premium subsidy would be extended to employees involuntarily terminated from April 1 through April 30.


The last short-term extension expired March 31.


Previously, as part of broader bill H.R. 4213, the Senate approved a longer extension to enable employees laid off through the end of the year to receive the COBRA premium subsidy, but the House has yet to take up that measure.  


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


 


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Truck Driver Can Press Sex Discrimination Claim

A female truck driver who was terminated after being given a physical test not required of her male colleagues can pursue a claim of sex discrimination, a federal appeals court has ruled.


According to the 4th U.S. Circuit Court of Appeals in a ruling April 7 in Deborah Merritt v. Old Dominion Freight Line Inc., Merritt had worked six years as a “line haul” driver for Thomasville, North Carolina-based Old Dominion and often made lengthy cross-country trips.


She sought a transfer to a position as a pickup-and-delivery truck driver because it meant more regular hours, but was passed over twice in favor of less experienced men. There are about six female pickup-and-delivery drivers among 3,100 men in this position at Old Dominion Freight, according to court documents.


Merritt eventually was moved to a pickup-and-delivery job but hurt her ankle in September 2004. Although the company’s doctor reported the ankle was healed in December of that year, Old Dominion Freight required that she take a physical ability test used primarily to evaluate new hires before she could return to full-time work.


Merritt, who received an “overall failing grade” on the pass/fail test, said the problems she had were with tasks unrelated to her ankle injury.


Her job was terminated and Merritt sued the company for sex discrimination under Title VII of the Civil Rights Act of 1964.


In its ruling, the Richmond, Virginia-based appeals court panel unanimously overturned the ruling of a lower court, which had dismissed the case, and remanded it for trial.


The “alleged facts are too problematic to overlook,” the appeals court said in its ruling. “Old Dominion fired an employee who was, according to the district court, ‘able to do her job without assistance and in a satisfactory manner,’ due to a treatable ankle injury, while hiding behind the results of a selectively administered physical fitness test that did not even purport to test the injury, and while dubiously claiming that its decision was compelled by a late-blooming policy, all in the context of, to put it mildly, a sexually stereotyped work environment.” 


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


 


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Surprising Number of Adults See Quarter-Million Dollars as Sufficient Nest Egg

Women and men are about equally likely to say that they’re saving for retirement. Men are more confident, however, that they’re doing a good job of preparing to retire.


And a surprising number of both men and women believe they’ll be able to retire on less than $250,000.


Those are some of the results of a poll of 1,153 workers and retirees conducted by the Employee Benefit Research Institute. EBRI found that 71 percent of the polled men and 68 percent of the women said they have saved for retirement. Fully 62 percent of the men said they are currently saving for retirement, while 58 percent of the women said the same.


Both sexes are also on fairly equal ground when it comes to assessing how much money they felt is necessary to retire. About a quarter of both groups felt they will need between $500,000 and $999,999 in order to stop working.


But the biggest slice of the respondents—32 percent of women and 27 percent of men—said they could retire with less than $250,000.


About one out of four of the male respondents believe that they are doing a “good job” preparing for retirement, and 14 percent think they’ve saved enough to mange medical expenses. An additional 15 percent of men predict they’ll have enough money to pay for long-term care during retirement.


Women have a bleaker outlook: 17 percent feel that they are doing a “good job” of getting ready for retirement. The outlook is less sanguine on health costs: 10 percent of women feel they will have enough money to handle medical costs, while only 4 percent feel they’ll have sufficient cash to pay for long-term care.


There are a number of possible factors behind the contrasting view. For instance, women spend less time in the workforce than men, and they have longer life spans, noted Stephen Blakely, managing editor at EBRI.


“Some gender differences are narrowing over the years, as women in recent years are spending more time in the workforce than their mothers and grandmothers,” he said.


 


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


 


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Wisconsin Establishes Health Care Reform Agency

Wisconsin Gov. Jim Doyle signed state legislation to create a new Office of Health Care Reform, which will be ordered to set up the state’s insurance exchange and pursue federal funding for a high-risk insurance pool.


Doyle said federal reform will extend insurance to 125,000 more Wisconsin residents than have it today, but he touted the state’s existing insurance programs, which he said have made the state the second-best in the nation for access to health care.


“Because of the work the state has done over the last seven years to build out our health care system, Wisconsin is ideally situated to implement reform,” Doyle said in a news release.


The new office will coordinate “transparent” access to insurance information so that individuals and businesses can make side-by-side comparisons of the plans, including a state-run Web site that will publicly publish the costs of the plans.


The office will also pursue federal funds so that Wisconsin can join other states opting into a nationally subsidized temporary high-risk insurance pool designed to offer coverage to adults with pre-existing conditions who will be unable to get insurance until the federal mandate to cover them takes effect in 2014. 


Filed by Joe Carlson of Modern Healthcare, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Chicago-Area Hospital Makes Good on Pledge to Repay Workers for Frozen Wages

When management at Swedish Covenant Hospital in Chicago froze salaries last year, it also struck a deal with its 2,200 employees: Help us turn a profit and we’ll give your money back.


Now, executives are spending $1.5 million—more than a third of the annual operating profit—to make good on that pledge. Starting next week, the Northwest Side hospital’s workers will receive a lump sum to repay salary forgone over the past recession-riddled year.


“Rather than cut staff, we decided it was a better option to give them ownership of the solution,” said Swedish Covenant CEO Mark Newton. “We said: ‘Here’s how you can earn it back.’ ”


Restoring pay lost to a salary freeze or reduction is rare, compensation experts say.


Just 4 percent of employers that cut pay during the recession, and 2 percent of those that imposed salary freezes, said they would provide lump-sum payments to make their workers whole, according to a survey released in January by WorldatWork, an Arizona-based human resources association.


“There were some really draconian steps taken by employers last year who were genuinely fearful that their business was on the line,” said David Van De Voort, a Chicago-based partner at Mercer. “It’s just a strategically smart thing to demonstrate to your workforce that you didn’t like doing it, and you’re changing it as soon as you can.”


Swedish Covenant had been at “significant risk” of posting a loss for the year from a dip in patient volume due to the economy and roiling credit markets that threatened to push debt payments higher, Newton said.


While the salary freeze shored up expenses, Newton challenged staffers to help the hospital hit its goal of a $3 million operating profit through their own cost-cutting efforts and by enhancing revenue through better customer service.


Food service workers trimmed $15,000 by changing their milk vendor. The pharmacy saved $60,000 by more efficiently managing antibiotics. Nurses in the surgical recovery area saved nearly $25,000 by cutting back on overtime.


Employees even voted down an annual employee recognition cruise on Lake Michigan to save cash.


“Everyone wanted to meet the challenge so they could get their money back,” said Pat Zeller, nurse manager in the surgical recovery unit.


The hospital ended up with a $3.9 million operating profit and will take $1.5 million of that to reimburse staff. Most workers will get a 1 to 3 percent raise in a lump-sum payment.


Newton also pointed to a 2 percent increase in patient volumes, which he attributed in part to a more concerted effort to keep patients—and the physicians who bring the hospital its business—happy.


“We got to our goal through a series of incremental steps taken by 2,200 employees,” he said. 


Filed by Mike Colias of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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GM, Chrysler Might Have to Contribute Nearly $15 Billion

General Motors Co. and Chrysler Group are projected to make required contributions totaling $14.92 billion to their pension plans by 2014 to comply with federal funding requirements, according to a Government Accountability Office report.


Under the Pension Protection Act of 2006 and the temporary funding relief of the Worker, Retiree and Employer Recovery Act of 2008, GM would have to contribute $5.9 billion in 2013 and $6.4 billion in 2014, while Chrysler would have to make contributions of $400 million this year, $40 million in 2012, $930 million in 2013 and $1.25 billion in 2014, the report said.


The “future viability of the companies and their pension plans is unclear,” stated the report, which was released Tuesday, April 6.


GM had $85.9 billion in pension assets and Chrysler had $20.4 billion, both as of September 30, according to Pensions & Investments, a sister publication of Workforce Management.


Treasury Department officials “expect both GM and Chrysler to return to profitability,” the report said. “If this is the case, and the companies are able to make the required contributions to their pension plans as they become due, then Treasury’s multiple roles [as an owner and regulator] are less likely to result in any perceived conflicts. 


However, if the funding of any of GM’s or Chrysler’s defined-benefit plans declines below [statutory required] funding levels, the company may request a waiver” from the IRS “to reduce its required contributions to its plans over an extended period.”


In addition, “automaker downsizing and the credit market crisis have created significant stress for [auto] suppliers and their pensions,” including in 2009 “a rise in the number of supplier bankruptcies, liquidations and pension plan terminations.”


In July, Delphi Corp. of Troy, Michigan, terminated its pension plans; as a result, the Pension Benefit Guaranty Corp. estimates it will have to finance about $6.2 billion of Delphi’s pension funding shortfall, the report said.


In January 2009, the PBGC estimated that unfunded pension liabilities across the auto sector totaled $77 billion, “with the agency’s exposure for potential losses due to unfunded benefits about $42 billion, leaving plan participants to bear the potential loss of the $35 billion difference through reduced benefits.”


Because of the funding risk, the GAO recommends Treasury should report publicly not only on the status of its auto investments but also on the status of the automakers’ pensions. But in a response contained in the report, Herbert M. Allison Jr., assistant secretary for financial stability in the Treasury, wrote, “It would be inappropriate for Treasury in our capacity as a shareholder to separately report on the pension assets and liabilities under GM and Chrysler pension plans.”


Chrysler CEO Sergio Marchionne expects the company “to break even this year,” said Chrysler spokesman Mike Palese, who hadn’t seen the GAO report and had no comment about it.


GM couldn’t be reached for comment. 


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


 


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