Author: Site Staff

Posted on

Coca-Cola Gets Final OK for Retiree Health Funding Plan

The Coca-Cola Co. has received final authorization from the Labor Department for its groundbreaking approach to funding retiree health care benefits through a special trust and Coca-Cola’s captive insurance company.


The final authorization was published in the Federal Register on Friday, April 2.


Under its plan, Atlanta-based Coca-Cola will use assets in a voluntary employee beneficiary association to purchase medical stop-loss policies from Prudential Insurance Co. of America to pay claims over the expected lifetimes of roughly 4,000 retirees and dependents. Coca-Cola established the VEBA in 2006 and contributed $216 million to the trust.


The medical stop-loss coverage will pay claims that fall between an attachment point and an upper limit.


In its application with the Labor Department, Coca-Cola said the attachment point for all retirees would be $100. For those younger than 65, the upper limit would be $5,800; for retirees 65 and older, the upper limit would be $3,500. Those figures may change slightly when the stop-loss program is put in place.


Prudential in turn will use the premium it receives from Coca-Cola to reinsure the risk with Red Re, a South Carolina-domiciled captive insurer and one of three captives owned by Coca-Cola.


Benefit experts say that there are significant financial advantages to Coca-Cola’s funding approach and that other employers are likely to follow Coca-Cola’s lead.


“There is interest in the market in this approach,” said Kathleen Waslov, an associate with Towers Watson & Co., a consultant to Coca-Cola on the project.


Coca-Cola still is waiting for a private-letter ruling from the Internal Revenue Service involving tax issues related to the transaction.


“We are pleased that the Department of Labor has authorized our VEBA retiree health care benefits funding proposal. We will await the private letter ruling from the IRS before we begin implementing the new plan,” Coca-Cola said in a statement.


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


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

Posted on

Lifelong Investing Helps Older Workers Weather Storm, Study Says

A lifetime of investing helped older workers’ retirement plan investments withstand the declines of the 2008-2009 market crisis, says a new analysis by Boston College’s Center for Retirement Research.


“As jarring as the financial collapse may have been for the Early Boomers, the market has actually treated them quite well in their lifetime,” says the CRR report, which defines this group as people who were 50 in 1999.


The authors compared Early Boomers using two benchmarks—lifetime returns on retirement assets and the investing results of what CRR calls Late Boomers (people who were 40 in 1999) and Generation Xers (people who were 30 in 1999), the report says.


Late Boomers, meanwhile, have “experienced a less favorable investment environment over their careers and will need extraordinary returns just to end up as well off as the Early Boomers are today,” says the report written by Alicia H. Munnell, the center’s director, and by Jean-Pierre Aubry, a research associate.


“Generation Xers, given their short careers, have faced the worst environment, but they have more time to catch up,” the report says.


To illustrate their research, the authors looked at annualized returns for three hypothetical workers starting all-equity investments in their 401(k) plans by age 30. The comparison assumes these investments amounted to 6 percent of salary each year and that employers made a matching contribution of 3 percent each year.


The researchers examined how these investments would have fared over three periods for each worker from age 30 to the market peak in October 2007; from age 30 to the market bottom in March 2009; and from age 30 to February 2010.


The Early Boomers had a 12.4 percent annualized return through the market-peak period, compared with 10.3 percent for the Late Boomers and 8 percent for the Generation Xers. The results for the market-trough period were 7.9 percent for Early Boomers, 3.1 percent for Late Boomers and -6.4 percent for Generation Xers. Through February 2010, Early Boomers had 9.2 percent versus 5.5 percent for Late Boomers and 0.3 percent for Generation Xers.


And when researchers ran the investment numbers using 50 percent equities and 50 percent bonds for each group, they came up with the same conclusions. During each period, the Early Boomers scored highest, Late Boomers were second and Generation Xers finished last.


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


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

Posted on

Gencorp Restores 401(k) Match; Report Cites Growing Trend

Defense and aerospace company GenCorp Inc. said it was reinstating its 401(k) plan matching contribution, the latest in a growing number of employers that have done so or will be doing the same.


In a Securities and Exchange Commission filing Tuesday, March 30, Rancho Cordova, California-based GenCorp said it would restore its 401(k) plan match for nonunion employees at the same rate prior to its January 15, 2009, suspension. The match will be restored in July.


Prior to the suspension, GenCorp matched 100 percent of employees’ salary deferrals up to the first 3 percent of pay and 50 percent of deferrals on the next 3 percent of pay.


However, GenCorp now will make matching contributions in cash. Previously, it matched contributions with company stock, which a GenCorp spokeswoman previously said was diluting the stock’s value.


Meanwhile, a survey released Wednesday by Boston-based mutual fund provider and 401(k) plan administrator Fidelity Investments found that 44 percent of employers that suspended their matching contributions last year either have reinstated or intend to reinstate the match during the next 12 months.


“As the economy begins to improve, employers large and small are bringing back their 401(k) matching programs,” James M. MacDonald, president of Fidelity unit Workplace Investing, said in a statement.


The likelihood of employers reinstating matching contributions, though, varies significantly by company size. For example, among employers with at least 5,000 employees, 70 percent either have restored or intend to restore the match within the next 12 months, nearly double the 36 percent of employers with 500 or fewer employees that either have restored matching contributions or plan to do so.


The results are based on a survey this month of 293 Fidelity clients that suspended or reduced their 401(k) matching contributions last year.


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


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

Posted on

Boeing Will Take $150 Million Charge Due to Health Reform

Boeing Inc. said Wednesday, March 31, that it will take a $150 million charge against net earnings in the first quarter this year to reflect a change in the tax treatment of federal subsidies provided to employers that offer prescription drug coverage to Medicare-eligible retirees that is at least equal to Medicare Part D.


Under current law, the government provides tax-free reimbursement of 28 percent of employers’ retiree prescription drug expenses that fall within a certain range. But health care reform legislation signed into law this week by President Barack Obama will alter that tax treatment beginning in 2013.


While the tax-free subsidies will continue, employers receiving them no longer will be allowed to take a tax deduction for prescription drug expenses equal to the amount of the subsidy.


Under U.S. accounting rules, employers are required to immediately recognize the impact of such a change on their financial statements.
Boeing’s announcement came on the heels of several other charges announced by other U.S.-based companies. They include:


• AT&T Inc., which last week said it would take a noncash charge of about $1 billion.


• Deere & Co., which reported a $150 million charge.


• Caterpillar Inc., which reported a $100 million charge.


• Prudential Financial Inc., which reported a $100 million charge.


• 3M Co., which reported a noncash charge of up to $90 million.


• AK Steel Holding Corp., which reported a noncash charge of about $31 million.


• Illinois Tool Works Inc., which reported a $22 million charge.


• Valero Energy Corp., which reported a charge of $15 million to $20 million.


• Honeywell International Inc., which reported a $13 million charge.


• Goodrich Corp., which reported a charge of about $10 million.


• New York-based Allegheny Technologies Inc., which reported a $5 million charge.


Meanwhile, Verizon Communications Inc. said in an 8K filing last week that it is evaluating the impact of the legislation on its effective tax rate, “which may be material.”


General Electric Co. said it will not take an earnings charge in response to the legislation because it converted its retiree prescription drug benefits in 2009 to a Medicare-approved plan provided through a third-party administrator and is no longer receiving a federal subsidy.


In statements, all of the companies that took one-time charges said they will be taken in the first quarter of 2010.


Four companies—AT&T, Verizon, Caterpillar and Deere—already have been invited to testify next month at a hearing by the House Energy and Commerce Committee on the subject.


In reporting its $150 million charge, Boeing said the impact of the loss of the tax deduction was not contemplated in guidance that the Chicago-based aircraft manufacturer issued January 27, but said the guidance will be updated when its first-quarter results are released.


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


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

Posted on

Dear Workforce How Do We Keep People Motivated Following Layoffs?

Dear Gloom and Doom:

The most significant challenges faced by an organization following layoffs are managing a distracted workforce, coping with increased stress caused by expanding workloads, and turnover among top talent, who have options regardless of economic conditions.

Your primary goal should be to get the workforce focused and united behind the premise that their productivity and innovation are the key drivers of organizational stability. Do some quick interviews or a survey of workers to identify their issues and concerns.

Next, focus on improving communications and transparency. If they don’t get fast, frequent and accurate information from management, employees will rely on rumors or assume the worst.

Third, solicit their help in prioritizing the work. If you don’t identify low-priority things that employees can stop doing, your remaining workers will likely be overburdened.

Next, ask each worker and team to help you make a list of the “barriers to increasing productivity,” and then commit your time and resources to eliminating those barriers.

Finally, talk individually to top performers and key employees and work with their managers to minimize any issues that may cause them to consider leaving during this critical time.

SOURCE: Dr. John Sullivan, San Francisco State University

LEARN MORE: HR professionals find themselves on edge as layoffs mount.

Workforce Management Online — Register Now!

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.

Ask a Question
 Dear Workforce Newsletter
Posted on

Dear Workforce Should Our New HR Leader Come From Inside or Outside

Dear Putting Out Fires:

Your question strikes at the heart of the age-old debate: whether it is more effective to have a leader with institutional and technical knowledge or simply one with leadership skills and the ability to empower those who do have the institutional and technical knowledge. The answer may be influenced by what you expect the leader to do as much as by the organization’s culture and leadership structure.

For example, a leader in a lean organization may be expected to pitch in and work with the team in addition to providing guidance and strategic direction. On the other hand, a leader in an organization with a flat structure may of necessity have to rely on the expertise of others, using empowering leadership practices to get things accomplished. A leader functioning in a steep hierarchy may delegate all hands-on tasks. But in such an organization, employees are likely to be less empowered and more dependent on the leader for all but the most rudimentary direction—thereby demanding that the leader have significant technical know-how.

Before deciding the source from which you hire your unit leader, you might first ask yourself the following questions:

• What is the current culture of the organization?
• How do I want my leader to lead?
• What is the expertise I need in a leader for this unit, particularly in light of my answers to the first two questions?

Human resources knowledge is fairly generic, although there is certainly expertise that is specific to labor law and human resource practices for the unit your HR group supports. Consider the essential knowledge and experience that is most difficult to obtain and determine whether internal or external candidates for the position possess them.

If you are looking for a good fit for the current environment, you may want to look for someone who has both the ability to lead as well as difficult-to-obtain technical expertise specific to your organization.

Keep in mind that hiring an internal staff member to be a unit leader lets employees know that you are committed to rewarding those who develop and prepare for leadership responsibilities. Hiring from the outside communicates a lack of confidence in the bench strength of the unit. A good rule of thumb is this: Promote from within when internal candidates have the qualifications you need, but don’t rush an internal candidate into a position before the person is prepared.

SOURCE: Kevin Herring, Ascent Management Consulting, Oro Valley, Arizona, March 15, 2010

LEARN MORE: More tips and advice on when to promote from within and when to look outside.

Workforce Management Online, March 2010 — Register Now!

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.

Ask a Question
 Dear Workforce Newsletter
Posted on

Injured Worker Denied Comp Can Sue Employer

An injured worker’s lawsuit alleging his employer committed fraud is not barred by the exclusive remedy provision of Oregon’s workers’ compensation law, a state appellate court has ruled.


The ruling Wednesday, March 24, by the Oregon Court of Appeals in Patrick J. Merten v. Portland General Electric Co. stemmed from an April 2003 work accident in which the employee fell from a power pole.


Merten filed a workers’ comp claim, which the employer denied, telling the worker it would open the claim once he submitted medical records documenting his injuries from the fall. However, once Merten’s right to request a hearing on the claims denial expired, Portland General Electric refused to open the claim even though he submitted the medical records, court records state.


The worker sued for fraud, alleging the employer never intended to open his injury claim and told him that it would do so only to prevent him from making a timely request for a hearing on the claims denial.


A trial court granted the employer’s request for summary judgment, agreeing that the workers’ comp exclusive remedy barred the claim.


On appeal, the Oregon appellate court found that the plaintiff’s fraud allegations did not arise from the course of his employment and the alleged fraud could not be compensated by the workers’ comp system.


“There is nothing in plaintiff’s employment that caused his alleged fraud damages,” the court ruled. “Those damages were caused by defendant’s intentional nonwork-related conduct.”


The court also ruled that “a reasonable juror could find that the plaintiff reasonably relied on the defendant’s misrepresentations.”  


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


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.


 

Posted on

Senate Fails to Extend COBRA Subsidy Before Break

The Senate adjourned Friday, March 26, for a two-week recess without taking action on a House-approved bill that would temporarily extend federal COBRA health insurance premium subsidies.


Action stalled on H.R. 4851, which also would temporarily extend certain other expiring federal programs, after Republicans and Democrats clashed on how the extensions would be funded.


Without the extension, employees who are involuntarily terminated after March 31 will not be eligible for the 65 percent, 15-month premium subsidy. The House-approved bill, introduced by Ways and Means Committee Chairman Sander Levin, D-Michigan, would extend the subsidy eligibility through April 30.


However, the Senate is expected to take up the measure soon after legislators return April 12. If the bill is approved, the premium subsidies would be retroactive to April 1.


The Senate earlier approved legislation, H.R. 4213, to extend the subsidy to employees laid off through the end of 2010, but the House has not acted on that measure. 


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


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

Posted on

Ford VEBA Contribution Approved

Ford Motor Co. will be allowed to contribute $13.2 billion in company securities to the United Auto Workers’ voluntary employees’ beneficiary association fund under an exemption approved Thursday, March 25, by the Labor Department.


Ford filed its request for the exemption with the Labor Department’s Employee Benefits Security Administration in December. Ford sought the exemption to allow the UAW VEBA fund to hold Ford securities in excess of the amount permitted from an employer under ERISA. The Ann Arbor, Michigan-based VEBA has estimated assets of $44.4 billion, including the Ford contribution.


The exemption will permit Ford to carry out an agreement with the UAW to contribute two notes totaling $13.2 billion, bearing a 9 percent interest rate. Under the agreement, Ford has the option of paying up to half of the notes’ redemption in Ford stock or in cash.


In all, Ford is contributing $15 billion to the UAW VEBA, including $1.8 billion in diversified assets that were in a Ford-controlled VEBA. In addition, Ford will contribute warrants, whose value has not been estimated, enabling the UAW VEBA to purchase 362 million shares at $9.20 a share. Ford stock closed at $13.80 in trading today. Ford has 3.3 billion shares outstanding.


“We transferred all the assets on December 31, so this [exemption] was an after-the-fact blessing, which we needed,” said John Stoll, Ford spokesman.


In its exemption approval, EBSA officials said, “Ford explains that its option to contribute securities instead of cash is itself a form of protection for the VEBA” because Ford’s “continued commercial viability is necessary to ensure that the VEBA trust is fully funded. Ford asserts that permitting it to make contributions in Ford common stock, rather than cash, gives Ford the flexibility to avoid cash payments in low liquidity environments. Moreover, Ford maintains that it is not in anyone’s interest to compel a payment that pushes Ford into insolvency, thereby jeopardizing the new VEBA’s funding going forward.”


With the contributions, Ford will end its obligations to fund retiree medical benefits of its UAW-represented employees under a 2008 settlement agreement between the company and the UAW. 


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


 


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitterfeed or RSS feeds for mobile devices and news readers.