Author: Site Staff

White and Asian employees, regardless of pay, are far more likely to participate in 401(k) plans and to make bigger plan contributions than African-American and Hispanic employees, according to a new study.

Among those employees earning between $30,000 and $59,999, 75 percent of African-American and Hispanic employees participated in their employers’ 401(k) plans.

That compares with an average participation rate of 84 percent for Asian employees and 80 percent for white employees, according to a study conducted by Hewitt Associates of Lincolnshire, Illinois, and Ariel Education Initiative, a nonprofit affiliate of Chicago-based mutual fund provider Ariel Investments.

Participation rates also were linked to racial and ethnic backgrounds at higher income levels. For example, participation rates for those earning between $60,000 and $89,999 averaged 83 percent for African-American employees and 85 percent for Hispanic employees.

The participation rate averaged 92 percent for Asian employees and 88 percent for white employees in the $60,000 through $89,999 pay range.

At the highest income range, though, the differences in participation rates were much smaller.

For those with earnings of at least $120,000, the participation rate for Asian employees averaged 94 percent, compared with 92 percent for whites, 91 percent for African-American employees and 90 percent for Hispanic employees.

How much employees contributed to 401(k) plans also was directly tied to their racial and ethnic backgrounds. For example, on average, African-American employees earning between $30,000 and $59,999 deferred 5.9 percent of pay and Hispanic employees deferred 6.1 percent of pay to their 401(k) plans.

By contrast, Asian employees in the same pay range deferred an average of 8.4 percent of pay, while whites deferred an average of 7.1 percent of pay.

These racial and ethnic differences exist even at the highest income levels. For example, Asian employees earning at least $120,000 a year deferred an average of 12.1 percent of pay to their 401(k) plans, while white employees deferred an average of 10.4 percent. That compares with an average deferral rate of 9.7 percent for Hispanic employees and 9.2 percent for African-American employees.

The study also found that Asian and white employees, on average, take fewer hardship withdrawals and loans from 401(k) plans than African-American and Hispanic employees.

The study didn’t attempt to analyze why participation and contribution are higher for Asian and white employees compared with African-American and Hispanic employees. Still, those differences need to be addressed “if retirement security is to be a reality for all Americans,” said Mellody Hobson, president of Ariel Investments, in a statement.

“A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups—The Ariel/Hewitt Study,” funded by the Rockefeller Foundation, is based on 401(k) plan information—through December 31, 2007—for 3 million employees working at 57 large companies.

Summaries of the study are available at www.hewittassociates.com and www.arielinvestments.com.

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

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Dear Not Winning Them Over:

 

If you want support for your initiative, tie it to business-success indicators. Consider that your top executives are not particularly concerned with how well you perform recruiting functions and report headcount, overtime and turnover. But they are interested in improving profitability, productivity and other bottom-line outcomes. Redefining yourselves as talent solution experts, instead of recruiters, may help you think creatively about how your expertise could more directly benefit the business.

If you can use your expertise to solve a productivity deficiency, for example, by reducing turnover, improving the quality of new hires or reducing time-to-hire—and you are able to quantify the resulting improvement in productivity—you have a much stronger case for investing in your work group.

To win approval, you must first demonstrate how your ability to acquire high-quality people leads to measurable increases in client profitability, efficiency and customer service. Second, gain credibility by implementing solutions with results that delight your clients, and document your impact on the bottom line. Third, develop your proposal for obtaining financial support to include a promise to return a substantial benefit to the business as measured by management.

If you do all these well, it will be very easy for management to see the value of your proposal and give you the resources you need. Do them poorly, or skip a step, and you will most likely be perceived as simply one more overhead function requesting capital that could otherwise be invested in revenue-generating activities—a tough sell regardless of your persuasion skills.

SOURCE: Kevin Herring, Ascent Management Consulting, Oro Valley, Arizona, December 18, 2007

LEARN MORE: Many companies struggle with incomplete data when hiring or recruiting.

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 Everybody Is the Same:

 

What has been referred to as grade inflation or expansion can be attributed to five primary causes.

One is that the organization has not clearly defined to managers and employees what “good” or “expected” behavior looks like.

Another cause is that neither managers nor employees are properly trained how to measure and report performance results.

A third reason is that it is not unusual for both managers and organizations to make the mistake of viewing and using a performance appraisal process as a means of rewarding employees and staying in their good graces.

A fourth cause may be that managers have not experienced a model of a proper performance appraisal as a step in a comprehensive employee development system.

The fifth and final possible cause of grade inflation is that the final result is not challenged. In some instances a manager is permitted to submit a performance appraisal with a high rating and it goes unchallenged by his or her manager and is not compared with other employees.

Any of these reasons—or especially a combination of two or more—may indicate that your process is broken and in desperate need of repair and possibly replacement.

This space does not permit the opportunity to fully outline a detailed process, but I can offer a few suggestions.

First, audit your process. Take a close look at what you have and compare it with what you think you have and what you want. You may discover that what you have is exactly what you wanted when the process was implemented years ago. Try to see how your performance appraisal process fits in with the company’s staff development goals. Then determine whether or not they are consistent with the company’s mission to provide quality service, products, etc.

Develop focus groups to determine the perception of the process to members of the management team and line employees. There should be at least two teams: one group of only supervisors or evaluators, and another group of employees who are evaluated. You may want to have a third group that consists of both managers and employees.

Clearly define what the company wants from a performance appraisal process that supports staff development consistent with the company’s mission. Design or commission a process to be designed that addresses the company’s needs. This may require the development of multiple evaluation forms. You may discover that you need separate instruments to clearly define the performance of managers, non-managers, professionals, line employees and specific departments. Clearly define “good” or “expected” performance for each performance competency being evaluated.

Introduce the process to the company one layer at a time. The senior management team should experience the process first. Middle- and/or first-line supervisors should be introduced to the process in the second phase, and finally other employees should be brought in.

All company employees must be trained on how the new process works. It is important that managers fully understand the importance of how accurate assessments affect the organization. In the same respect, line employees must clearly understand how the process works and the definitions of “good” and “expected” performance. Without that knowledge they will not be able to properly assess their performance; if they cannot assess their performance they cannot fully participate.

Most important, the performance appraisal should be a step in the employee development process. The form is merely a documented summary of employee outcomes supported by a series of interactions and communication meetings with the employee’s supervisor or manager.

The final performance rating must be challenged. The appraisal form should be reviewed by at least one level above the evaluator and human resources for consistency. Each performance rated either above expectations or below expectations should require documentation that justifies the rating. Any final performance rating above or below expectations should be pre-approved by the evaluator’s manager prior to the evaluator reviewing it with the employee, so that the employee does not receive an evaluation that management does not fully support.

SOURCE: Lonnie Harvey Jr., SPHR, president of the Jesclon Group, Rock Hill, South Carolina, December 18, 2007

 

LEARN MORE: In a related matter, please read about how to separate merit raises from performance scores.

 

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 We May Be Overpaying:


Eligibility audits are designed to spot inadequate procedures—and lack of enforcement—that contribute to overpayment of health claims. Although employees often resist the idea, most audits provide an amnesty period during which ineligible dependents can be removed with no penalties.

 

Correcting eligibility requires plan sponsors to develop an employee documentation process. This concept is not new, but it does result in decreasing claims exposure.

Specialty audit firms can be helpful in performing eligibility reviews since they have the necessary staff to handle the administrative requirements of the process. These requirements include developing and sending initial notification letters to all employees with dependent coverage; collecting documentation; answering calls from employees wanting clarification or information; and providing updated eligibility information to other plan vendors.

Eligibility audits should be considered, for example, if a health plan:

 

• Does not require certified dependent documentation.
• Recently changed administrative service providers.
• Has recently experienced a merger or acquisition.
• Has a high turnover rate or collects enrollment information from multiple sources.
• Does not receive monthly adds/drops from the plan administrator.

Eligibility audits can also help plan sponsors answer such questions as:

• Are system updates timely?
• Are overpayments identified and recoveries pursued following retroactive changes?
• Is there exposure to high-dollar claims for dependents not qualifying for stop-loss coverage?

It’s easy to see why employers are looking at eligibility audits as a way to combat rising benefit costs, but they cannot be the only arrow in the quiver. There is no substitute for a well-thought-out health benefits plan aligned with an employer’s objectives that is diligently administered.

SOURCE: MaryAnne Watson and Don Cardone, the Segal Co., Phoenix, November 28, 2007

LEARN MORE: You can learn how companies are using dependent audits.

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.