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Category: Benefits

Posted on February 1, 2010August 31, 2018

Four Creative, Low-Cost Ways to Educate Employees About Benefits

Because of the economic climate, health care reform legislation and overall concern about health care coverage levels, most workers during the 2009 open enrollment season said they would pay greater attention to their enrollment choices and options for their benefits in 2010. According to a recent RTi Market Research study, “Health Care Reform and Enrollment,” 62 percent of employees said they planned to pay more attention to enrollment options and choices during open enrollment in 2009 than they did in 2008, citing rising costs/recession, concern about coverage, and health care reform as the top reasons for their greater focus.


One of the biggest challenges employers face when adding new benefits or conducting open enrollment is finding the time to educate employees about the changes or options, according to a recent Aflac study. But at the same time, many HR executives agree that there’s a need to better inform the workforce. They also know the potential payoff that education will have in the form of reduced turnover. Forty-nine percent of employers strongly agree that their employees need to have a better understanding of their benefits, and 43 percent believe a well-communicated benefits program leads to reduced turnover—and they are right. Two out of five employees agree that a well-communicated benefits program would make them less likely to leave their jobs.


Given the strong business case for a well-communicated benefits program, here are four ways to implement effective education initiatives without breaking the bank:


Make benefits more accessible: Executives would be surprised to know that most employees aren’t even aware of all the benefits available to them, let alone where to find information about them. Companies should begin by surveying their employees to gauge how many are aware of benefits offerings and how well they understand them. With a more clear view of the knowledge gaps that exist, HR executives can better address communication solutions and find ways to make benefits information more informative and accessible.


Many companies today are turning to online venues where employees can access any information, tools and tips about their company’s benefits packages. Regardless of whether you use an intranet or Web site, just be sure it is easy to use and interactive.


Communicate all year round, not just during open enrollment: Too often, employers only communicate their benefits programs to their workers once a year, heaping on the information at open enrollment time. Employees are already struggling to better understand even basic health care terms, so expecting them to retain large amounts of benefits information at once is unrealistic and unfair.


Instead, try communicating different segments of your employee benefits program throughout the year. This stands to improve the amount of information employees will retain, as well as make open enrollment a smoother, easier process.


Consider providing in-person meetings with HR or insurance carriers: Be wary of relying on only one communication vehicle to reach employees, who are sometimes inundated with enrollment materials. Consider using a variety of communication methods, including e-mail, broadcast voice mails, online outlets and in-person meetings with employees. Giving employees the opportunity to talk directly with benefits advisors or representatives from insurance carriers can be incredibly effective in terms of education. Most health insurance brokers prefer to meet in person with employees, and are adept at education and answering questions.


Identify areas to promote preventive care: According to the Aflac study mentioned earlier, employers cite “taking care of our employees” as the most important objective of their benefits programs. To further this objective, companies can conduct informal audits of how benefits are being used by employees. For example, if an employer finds that less than half of its workforce is taking advantage of a provision for a routine physical, this may be an area to aggressively promote to improve wellness and prevention among its workers.


While awareness about health care reform and economic factors have prompted employees to ask more questions, employers and benefits decision-makers should seize the opportunity to communicate more about their benefits options. This discussion can lead to greater peace of mind among employees. By spending less time worrying about outside financial pressures, they may well have more time to focus on work. And that’s good for everyone involved.

Posted on January 29, 2010August 31, 2018

PBGC Aids Insolvent Multiemployer Pension Plans

The Pension Benefit Guaranty Corp. said Thursday, January 28, that it will provide financial assistance to two insolvent multiemployer pension plans to ensure participants continue to receive benefits.


The PBGC will provide assistance to the Southern California, Arizona, Colorado and Southern Nevada Glaziers, Architectural Metal and Glass Workers Pension Plan in El Monte, California, which has about 5,200 participants. The agency sent an initial payment of $639,113 to ensure that the plan’s 1,500 retirees receive their guaranteed benefits. The PBGC estimates its total commitment to the plan at about $117 million.


The other plan receiving assistance is the United Food and Commercial Workers Local 1049 Pension Plan in Cedar Knolls, New Jersey. The PBGC has made an initial payment of $132,000 to ensure payment of benefits to 240 retirees. The PBGC estimates its total financial commitment will be $5.2 million.


The PBGC’s insurance program for multiemployer plans differs in several ways from its single-employer program. The PBGC actually takes over failed single-employer plans but does not take over insolvent multiemployer plans. Instead, the agency sends financial assistance to the plan to ensure that guaranteed benefits are paid.


The PBGC provides financial assistance to 40 insolvent multiemployer plans out of the roughly 1,500 multiemployer plans it insures. At the end of fiscal 2009, the PBGC had $1.5 billion in assets in its multiemployer insurance program to cover about $2.3 billion of financial assistance the PBGC expects to provide to the plans in the future.



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


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Posted on January 27, 2010October 31, 2023

10 Keys to a Sensible Overtime Policy

wage-and-hour
overtime
Developing a sensible overtime policy for your operation is essential and will result in a safer and more productive workforce.

Overtime is a common product of shift work and extended-hours operations, in part because small amounts of overtime are often built into shift schedules. However, if your operation uses additional overtime — that is, over and above regularly scheduled hours — you run the risk of increased costs, fatigue-related accidents and production errors. Developing a sensible overtime policy for your operation is essential and will result in a safer and more productive workforce.

Here are 10 tips for developing an overtime policy that will reduce the likelihood of safety, health and production problems.

1) Beware of the “excessive overtime cycle.” When overtime levels are too high, a counterproductive cycle quickly sets in. Shift workers always feel tired, making them prone to sickness or the need to take a mental health day. Consequently, absenteeism rises, which leads to more overtime and starts a vicious cycle that leads to productivity losses and increased accident risk.

2) Set an annual cap. To prevent an “excessive overtime cycle,” many operations set an annual or monthly cap on overtime hours. A cap benefits employee health and safety and also helps distribute overtime more evenly among the employee population.

3) Account for the “time of day” effect. An annual overtime cap is a good starting point, but it overlooks the effect circadian rhythms have on human performance. Because the human body experiences a low ebb in energy between 3 a.m. and 6 a.m., working during the overnight hours is much harder than working during the day time. Owing to this “time of day” effect, it’s advisable to track overtime hours by night-shift hours and day-shift hours. If you use fixed shifts, you might want to have a lower annual cap for night crews than day crews. If you use rotating shifts, you should make sure that no more than half of an individual’s overtime hours accrue during night shifts.

4) Restrict overtime to days off on 12-hour schedules. With 12-hour schedules, it’s prudent to have a policy restricting overtime on workdays except in emergencies, and even then to have a strictly enforced limit. It may be necessary at times to hold over a person for an hour or two while waiting for a relief worker to arrive, but prohibit shifts that last 14 hours or more. Overtime on 12-hour shifts, then, means the worker comes in to work on a day off. This is the trade-off for the 91 extra days off available with 12-hour shifts. In general, individuals should not work more than one additional shift per week and two additional shifts per month. The simple truth is that when you regularly bring in workers on their days (or nights) off, you forfeit the prime benefit of a 12-hour schedule—giving people more days off to rest and recover.

5) Avoid double shifts on eight-hour schedules. Double shifts, making for 16-hour days, are a bad practice, regardless of the hours they encompass. Except in emergencies, overtime on eight-hour schedules should be limited to an additional four hours.

6) Use caution when holding workers beyond eight hours. Even when you set the maximum work shift at 12 hours, you need to be wary of safety concerns, both during the final hours of the shift and on the drive home. Employees on eight-hour shifts are at risk because:

• They may be unaccustomed to working 12 straight hours.

• They don’t get the days off for recuperation that a full-fledged 12-hour schedule provides.

• Four hours tacked onto an evening shift leaves a person driving home at 3 or 4 in the morning, a high-risk time to be on the road.

7) Watch out for “overtime hogs.” Even if all the overtime at your plant is voluntary, you need to keep an eye out for individuals who work excessive amounts. It’s not uncommon for companies to have 20 percent of their employees working 80 percent of the overtime. Such a disparity should raise a red flag because people who routinely log 60- or 70-hour weeks are candidates for fatigue-related errors. Don’t try to solve the overtime-hog problem overnight. People who work a lot of overtime quickly become accustomed to the larger paychecks they receive and often adjust their lifestyles accordingly. Make sure workers understand the basis for policy changes, and build in steps that reduce overtime gradually.

8) Establish a formal rotation to distribute the overtime. If overtime is a regular feature of your operation, you should have some type of formal distribution system. This reduces the likelihood that you’ll be left shorthanded on any given day and prevents workers from feeling that a supervisor is playing favorites. With most overtime systems, workers’ names are placed on a relief list in order of seniority (or service time). When a worker’s name reaches the top, she has the first opportunity to work overtime. To distribute the number of overtime opportunities across the workforce, move workers to the bottom of the list whether they accept or decline the chance for overtime.

9) Emphasize cross-training. Some companies get into a bind because only a small percentage of the workforce is capable of handling certain types of jobs and tasks. Thus a few workers end up getting phenomenal amounts of overtime—whether they want it or not. When you train employees to handle jobs other than their own, it becomes easier to distribute overtime evenly. It may also reduce the need to call people in for overtime, maximize plant flexibility and reduce the number of people you need to provide relief coverage

10) Match staffing levels to work demand. For many companies, inefficient shift schedules lead to excessive overtime levels. For example, many operations with fluctuating work demands have antiquated work schedules that leave some employees idle and others with too much work. By re-examining how other companies deploy and schedule their workforces, it’s possible to dramatically reduce overtime and improve the efficiency, productivity and safety of your employees.

Source: Circadian

Posted on January 27, 2010August 31, 2018

Obama Looks to Ramp Up Retirement Savings Programs

The Obama administration announced plans to require employers to give their employees the option of enrolling in direct-deposit individual retirement accounts.
 
At a meeting of the Middle Class Task Force on Monday, January 25, President Barack Obama and Vice President Joe Biden, who is chairman of the task force, laid out that and other initiatives aimed at helping middle-class families. Providing economic security for such families “will be a big part of what we do in 2010 and all the way through the rest of the presidency,” White House communications director Dan Pfeiffer said in a telephone press briefing this afternoon.


At 11 meetings of the task force in the past year, the vice president has heard from parents, workers and students coming out of college, said Jared Bernstein, chief economic advisor to the vice president. The initiatives announced Monday “are aimed at helping middle-class families make ends meet, to ease some of that squeeze on middle-class family budgets,” he said.


Currently, 78 million working Americans, about half the workforce, lack employer-based retirement plans, the administration said in a fact sheet on the initiatives.


Employers that do not offer retirement plans will be required to enroll their employees in direct-deposit IRAs automatically unless the employees elect not to be enrolled in the plan. The contributions are to be matched by the saver’s tax credit for eligible families.


In the fact sheet, the administration said it is streamlining the process for employers to enroll workers in 401(k) plans automatically. New tax credits will help pay employer administrative costs, and the smallest firms will be exempt.


The administration will issue rules to improve the transparency of 401(k) fees to help workers and plan sponsors make sure fees are reasonable, and rules to encourage plan sponsors to make unbiased investment advice available to workers.


The administration also will promote the availability of annuities and other forms of guaranteed lifetime income.


In addition, clear disclosures about target-date funds will be required. “Due to their rapidly growing popularity, these funds should be closely reviewed to help ensure that employers that offer them as part of 401(k) plans can better evaluate their suitability for their work force,” the fact sheet said.


The president also called for expanding tax credits to match retirement savings and enacting new safeguards to protect retirement savings.


The child and dependent care tax credit for families making less than $85,000 a year will be raised to 35 percent of expenses, from 20 percent. All families making under $115,000 will be eligible for higher tax credits. Currently there is a 35 percent credit of the expenses for families above $15,000 in adjusted gross income, which phases down to 20 percent up to $43,000 in adjusted gross income and a 20 percent credit for all families earning above $43,000.


Student loan payments will be limited to 10 percent of discretionary income, and debt will be forgiven after 20 years of payments or 10 years of payments for people who undertake public service. Currently, yearly payments are capped at 15 percent of discretionary income, and debt is forgiven after 25 years of payments, or 10 years of payments if in public service.


More support is also being offered to help families care for elderly relatives.


Bernstein would not give any details on the cost of the initiatives or how they will be paid for. He said cost details will be revealed in the budget, which is to be released next week. Obama will talk about the initiatives in his State of the Union address Wednesday, January 27.


Most of the initiatives announced Monday are new versions of programs under discussion or are already in place, Bernstein said. But many of them “reach much higher into the middle class” or go further in helping to alleviate squeezes on middle-class budgets, he said.


Bernstein said that the “No. 1 imperative” of the administration remains to create more jobs, and he touted the administration’s $787 billion stimulus package, which he said has created or saved 2 million jobs. “But at the same time, middle-class families have been squeezed even before this recession took hold” in the areas of child care, education and saving for retirement—areas that are addressed by the initiatives. 



Filed by Sara Hansard of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Posted on January 27, 2010August 31, 2018

Almost Half of Wall Streeters to Get Bigger Bonuses This Year

Nearly every Wall Street worker is getting a bonus this year despite public outrage over banker compensation.


A new study conducted eFinancialCareers Ltd. showed that 92 percent of Wall Street workers have been told by their firms that they will get a bonus in the coming weeks for their performance in 2009. This compares with 79 percent who got bonuses last year for their work in 2008.


Of the 92 percent who are getting bonuses this year, 69 percent are getting at least the same amount they got last year.


In fact, nearly half—46 percent to be exact—are pulling in a fatter bonus than they received in 2008. Less than a third of the Wall Street workers will be getting smaller bonuses this year than last.


Employers seem to be supersizing bonuses this year as well. Workers in line for larger bonuses will be receiving, on average, double what they got in 2008.


The highest bonuses are going to employees at investment banks, private-equity firms, hedge funds and those working in trading and fixed-income markets. Wall Streeters working in wealth management, retail banking, real estate and investment marketing will get smaller bonuses.


“This is a very flexible performance-related pay structure,” said John Benson, chief executive of eFinancalCareers. “I think you’re seeing people who are clearly being rewarded for work well done. And firms can trim compensation levels if an individual has done less well.”


Benson said the public often thinks of bonuses as a “four-letter word,” but he pointed out that the bonuses are based on performance.


“I think the word ‘bonus’ is often taken by many people on Main Street to mean something that’s unexpected,” he said. “What we’re talking about here is performance-related pay.”


Survey participants did not disclose the exact breakdown of their bonuses. But 39 percent of financial services professionals indicated that bonuses that are more heavily weighted in stock would not influence their decision to leave their current position.



Filed by Lisa Shidler of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Posted on January 21, 2010August 31, 2018

10 Key Issues for Defined-Benefit Plan Sponsors

HR consulting firm Mercer notes that defined-benefit pension plan sponsors are starting 2010 with “renewed optimism,” as the economy and capital markets have rebounded, bringing pension plans’ funded positions along with them. Mercer says that sponsors should “temper this optimism with a drop of caution, because many issues that arose during the economic downturn still exist.” Mercer has identified 10 key issues pension plan sponsors should examine for opportunities to improve their plans’ financial and regulatory footing:


1. Reduce pension risk and required contributions. Many pension sponsors have already made several key decisions regarding the methods used to calculate the funding of their plans, but now there is a one-time opportunity to make another election. They can adopt segmented rates and lower the 2010 minimum required contribution and reduce long-range pension risk.


    2. Avoid surprise contributions. Changes to plan provisions or negotiated benefits may require an immediate cash outlay by the pension sponsor. Therefore, any impending changes should be carefully analyzed to determine their potential effect on the funding requirements and the possible benefit restrictions if contributions are not made in a timely way.


3. Educate fiduciaries about pension-plan risk. Many plan sponsors who thought they understood pension-plan risk have realized that they did not. Sponsors should regularly review multiyear forecasts of the plan’s funded status against varying economic scenarios so that they have a solid understanding of potential financial commitment they may face in the distant or not-so-distant future.


4. Understand benefit-restriction triggers and funding certifications. Amendments to plan provisions or special events, such as a plant shutdown, can trigger immediate benefit restrictions. They may also require immediate updates to funded-status certifications to avoid potential plan disqualification. Pension sponsors should review their governance structure to ensure effective coordination with all parties involved in such transactions or events, as well as the actuary.


5. Anticipate new Pension Benefit Guaranty Corp. reporting requirements. The PBGC is likely to add new “reportable events” requirements in 2010 and has also proposed eliminating most automatic waivers and filing extensions. These changes will increase sponsors’ reporting burdens and may have secondary effects, such as triggering disclosures under debt covenants.


6. Consider delegating investment discretion. Effectively managing a pension plan takes resources, time and specialized investment expertise. Many sponsors cannot adequately staff to handle the increasingly complex plans, making it difficult to properly react to capital market changes and opportunities. Sponsors should consider whether delegating investment decisions to a qualified fiduciary may better meet both sponsor and plan objectives.


7. Revisit the investment manager structure. Given the upheaval in financial markets and an unclear future, take an initial step and revisit the entire investment manager structure. Next, review how each asset class is structured and, finally, re-evaluate the fees charged by managers.


8. Review and verify risk tolerance. Increased market volatility has certainly shed light on the riskiness of certain investment products. This is a good time to reassess attitudes about risk, especially within alternative investments and other derivative-based products. Does taking on increased risk meet the overall objectives of the plan?


9. Set guidelines to avoid conflicts of interest. U.S. Department of Labor and Internal Revenue Service auditors are looking for potential conflicts of interest with anyone who may influence investment decisions. Plan sponsors should set formal guidelines for this process, including standards regarding gifts from current or potential vendors.


10. Take steps to prevent fiduciary pitfalls. When audits or lawsuits occur, the DOL, the Securities and Exchange Commission, external auditors and courts focus on the fiduciary decision-making process, not just the outcomes. Sponsors should review their own structures, including the roles and responsibilities of the benefits committee, to verify proper accountability, oversight and overall compliance.


Mercer has also compiled a companion list of resolutions for defined-contribution plans.


Source: Mercer

Posted on January 21, 2010June 29, 2023

Special Report on Pension & Retirement Benefits Playing Catch-Up

Employers with defined-contribution plans have a lot of work to do this year.


That is probably not what company executives want to hear after suffering through the nastiest market tailspin in recent history. But here’s the problem: To avoid workers lingering longer in their jobs just to beef up their retirement accounts, employers need to be better problem solvers and get workers to save enough money to be self-sustaining through retirement. That has been the core issue ever since defined-contribution plans became the No. 1 way employees save for retirement.


The baby boomers’ imminent arrival at retirement age, coupled with low returns from the bear market of 2008 and early 2009, is forcing employers to face up to this new demographic risk and how it may affect their business.


“This is the first time I’ve heard [plan] sponsors say they are worried about employees hanging on to jobs,” says Robyn Credico, senior retirement consultant at Towers Watson in Arlington, Virginia. “They are faced with a different kind of volatility and all they are trying to do now is help people save more.”


That means a lot of things on the to-do list for employers, and there is evidence many are gearing up to focus on retirement this year.


A major factor in encouraging employee participation in defined-contribution plans is the employer match, but 12 percent of companies froze those in 2009. Now, 35 percent are bringing the match back, studies from consulting group Towers Watson showed. Of those companies reinstating the match, 70 percent said it’s going back to the original level.


    Additionally, three major trends have significantly accelerated and have helped many workers’ defined-contribution accounts weather the worst of the financial tsunami. That trio is automatic enrollment, the use of default investments such as target-date funds, and the automatic escalation of employee contributions of funds. All were made easier by the 2006 Pension Protection Act and show signs of continuing a remarkable upward trend, helping employers provide a meaningful way for employees to save, observers say.


Plans put to the test
To show how automatic enrollment, diversified investments and solid contribution rates can work even during the worst of times, Vanguard Group found only a 14 percent median decline among its 3 million participants in 2,200 defined-contribution plans in 2008.

Pre-retirees ages 55 to 64 saw a 16 percent median decline. Those invested heavily in stocks took major hits, but workers who regularly contributed to their funds and invested in glide-path or target-date funds fared much better, the study found. Compare this with the Standard & Poor’s 500 stock index, which dropped 37 percent in 2008.


“I don’t think there is any question that [the Pension Protection Act] provisions have set people up to succeed,” says Ann Combs, head of Vanguard Strategic Retirement Consulting. Combs was the assistant secretary of labor for pensions during the George W. Bush administration when the law passed. “PPA has improved people’s ability to save for retirement.”


The number of plans using automatic enrollment has more than tripled since 2005, according to a recent survey by Hewitt Associates Inc. Of the plans using automatic enrollment, nearly 70 percent use target-date funds as the default. The survey of 300 midsize to large employers shows more companies are automatically contributing funds for employees. Forty-four percent of those companies annually increase the original contribution amount, and 5 percent are planning to implement an automatic increase this year, Hewitt found.


Despite concerns that employees would opt out if their contribution rate got too high, Hewitt found that less than 10 percent of employees did so, no matter the rate, says Pam Hess, director of retirement research. “If you escalate by one percentage point a year it’s a pretty painless way to get people to save more,” Hess says. “Our research implies companies could start the default at 6 percent.”


Easier access, more options
In step with the upward trend of many Pension Protection Act features, companies are looking to strengthen other 401(k) elements this year, including faster entry to plans, investment options and employer-contribution options.


   Target Corp., for example, is changing the way it delivers matching contributions starting this month. The Minneapolis-based retailer matches up to 5 percent of eligible pay, and employees are immediately 100 percent vested. Starting this month, Target is allowing employees to invest the employer match directly into any of the 20 available funds or company stock, instead of putting the company match solely into its stock.

Target’s move is in line with Hewitt’s research showing fewer employers making matches in company stock. Only 17 percent of employers did that last year, compared with 23 percent in 2007.


“This change is being made to give team members additional options to ensure their account is appropriately diversified for their needs,” company spokesman Trace Ulland said in an e-mail.


Target’s $4.5 billion 401(k) plan has about 140,000 participants with an average account balance of about $32,000. A new “Retirement Readiness” index created by Fiduciary Benchmarks, a company in Portland, Oregon, shows Target employees are 101 percent ready to retire.


Tinkering with career development or recognition programs will not suffice for employees who have swallowed outright pay cuts or faced freezes representing the permanent loss of the average 3 percent pay increase that would have occurred in 2009 if employers had left pay programs intact. When the workforce is soured over pay cuts, only money talks.


(To enlarge the view, click on the image. Adobe Acrobat Reader is required.)




To speed automatic enrollment, more companies are eliminating or lowering the service requirements needed to gain entry to the plan. Hewitt found that 74 percent of 401(k) plans didn’t have a service requirement last year, which is steadily climbing from 61 percent in 2007.


Meanwhile, there is no slowing down the use of target-date funds, according to several studies. Nearly 58 percent of companies used them in 2008, up from 44 percent in 2007, the Profit Sharing/401k Council of America reported in its annual study.


Larger employers, such as Wal-Mart Stores Inc., are starting to use a custom-designed target-date fund to fine-tune the retirement needs of its 1 million 401(k) plan participants. The company says the move will help keep management fees low as well as give it more asset allocation and other types of managerial control.


And while this type of fund has received scrutiny because of fee variation and transparency issues, observers agree that over time, these glitches will be worked out.


“Target-date funds are not as sophisticated as they’re going to be in the future,” says David Wray, president of the Profit Sharing/401k Council of America. “We need more history to see how they go through up and down periods.”


Guaranteed income
Annuities that are built into the 401(k) plan are a new investment option being explored by employers that are looking for fixed-risk protection—not just from investments going bad, but also from retirees outliving retirement income.


One of a handful of managers offering an income guarantee is Prudential Financial Inc. IncomeFlex locks a specific income throughout an individual’s lifetime in retirement. The account automatically tells participants exactly what their retirement income will be once they reach a certain age. Employees can’t lose money in the investment, even when markets turn sour.


Since this is a new type of investment, it will take time for it to gain popularity, says George Castineiras, senior vice president for Prudential Retirement. Nevertheless, Castineiras says, “I am very optimistic this is going to take off.”


And while guaranteeing an income stream throughout retirement is a great idea, it still needs development, some observers say. After seeing numerous financial institutions tank during the recession, many plan sponsors worry about the inherent long-term relationship such an investment requires.


“There is some very sophisticated thinking going on here,” Wray says. But he adds that some issues—notably liability and portability—haven’t been completely resolved.


After seeing several banking companies tank during this recession, investors are unsure whether it’s wise to make a long-term commitment with one provider. They question of what will happen if a provider goes out of business is unclear, Wray says.


“Especially with what we’ve experienced with financial institutions, no one is 100 percent sure about making 50-year decisions like this,” he says.


Portability presents the question of what to do if an employee moves on to another job. Currently, the annuity either remains at the former employer, to be tapped at retirement age, or its assets can be converted and rolled into an individual retirement account.


“Plan sponsors are very interested in finding out whether there are better ways to service participants,” Wray says. “Clearly conversations are going on and plan sponsors are moving in the right direction.”


Workforce Management, January 2010, p. 23-26 — Subscribe Now!

Posted on January 21, 2010June 29, 2023

DB Sponsors Under the Gun to Fund Plans

Saint Barnabas Health Care System expected to contribute $41 million to its defined-benefit plan this year, but with a $150 million investment loss in the plan, the company is going to need to invest a lot more, thanks to federal funding rules.


Saint Barnabas recently announced it would be suspending future contributions to the pension plan, but a federal law will force the company to contribute more this year than it did in 2009—even with freezing the plan.


“It’s a staggering amount,” says Sid Seligman, senior vice president of human resources for the health care system, which is based in Orange, New Jersey.


The Pension Protection Act of 2006 requires defined-benefit plans to be fully funded by 2011. Because of the financial crisis, Congress eased the law’s original funding requirements in 2008. But each year, companies still need to meet specific funding levels until plans are 100 percent funded in 2011. That part of the law didn’t change.


The 2008 rule allows companies that miss targets one year to get bumped to the next annual funding level, instead of the original provision, which forced plans to be 100 percent funded the year after they missed the specific goal. For example, companies that missed the 94 percent level in 2009 would need to be 96 percent funded this year but not completely funded.


“When PPA was enacted, we never foresaw the situation we are in today,” says Lynn Dudley, senior vice president for policy at the American Benefits Council in Washington.


And while the 2008 provision improved conditions for companies, they still will need to contribute $89 billion to meet the 96-percent-funded threshold this year, consulting firm Towers Watson estimates. By contrast, the 2009 contribution was expected to be about $32 billion. The number jumps to $146 billion in 2011.


Without relief, the average funded status will be at about 83.8 percent this year and 76.8 percent in 2011, Towers Watson predicts. Congress needs to give employers more time to fund their plans, because tightened credit markets are limiting companies’ ability to borrow for pension funding and a multitude of other needs, Dudley says. If the funding requirement is not relaxed, jobs, salary increases and capital improvements are all in jeopardy, observers agree.


“Companies will have to make very hard decisions now in order to make these obligations,” Dudley says. “Should [employers] lay off people, companies are not going to have the workforce needed when they come out of the recession.”


“When [the Pension Protection Act of 2006] was enacted, we never foresaw the situation we are in today. … Companies will have to make very hard decisions now in order to make these obligations”
—Lynn Dudley, American Benefits Council


Reps. Earl Pomeroy, D-North Dakota, and Patrick Tiberi, R-Ohio, introduced legislation late last year that would give companies more time to meet funding levels. Under the bill, companies would get a choice of either extending the contribution timeline out nine years, with the added benefit of making interest-only payments the first two years, or making payments on a 15-year schedule. If they choose the latter option, employers would need to guarantee retirement benefits and agree to other technical conditions. The bill also stretches the payment schedule for multiemployer plans.


“Most likely, we will see some form of more time early [this] year,” Dudley says.


Workforce Management, January 2010, p. 26 — Subscribe Now!

Posted on January 19, 2010August 31, 2018

Employers Report Dissatisfaction With Health Insurers Services

In most every respect, employers of all sizes are less happy than in previous years with the services provided by their health insurers, according to a PricewaterhouseCoopers report published Tuesday, January 19.


Overall, 59 percent of employers said they were satisfied with the job performed by their health insurer in 2009, down from 64 percent in 2008. And the smaller the firm, the less satisfied they were likely to be, though the level of satisfaction has remained steady at 52 percent. Employers are particularly dissatisfied with services intended to lower cost and improve employee health.


“I think in this economic time, [employers] are under significant economic pressure with their health benefits,” said Kathryn Stein, managing director at PricewaterhouseCoopers’ health industries practice in Chicago and an advisor to the team that authored the report. “And they are looking to insurers to step up and help them deal with cost issues, access issues and affordability—all the things they need to do to manage their health benefits.”


Health care costs continue to widely outpace inflation. And employers believe that insurers are not doing enough to keep those costs under control, forcing employers to pass them on to employees. Despite the recession—or perhaps because of it—60 percent of employers in the study said they would increase health care cost-sharing for employees. Increasing the relative burden of health care costs among employees was the most prevalent cost-control strategy used by the businesses that were surveyed.


More employers want health plan members to have access to better personal health technology tools, but as the importance of such mechanisms grows in the eyes of employers, the less insurers are doing to adequately provide the services. Satisfaction with personal health records and online comparison tools actually dropped 10 percentage points among large employers since 2008, the report states.


The report also notes that insurers have not done enough to provide employers with “meaningful and higher-quality data to help them control costs and keep their employees healthy. Employers would like insurers to take an active role in waste reduction and are looking for consistency and transparency in their health benefit plans.”


Less than 25 percent of employers are satisfied with their insurers’ ability to prepare risk profiles for their plan members.


Wellness and disease management programs also are problematic areas. Insurers have successfully marketed these programs, with more employers offering them than in previous years in the belief that they are critical or important to their business, according to the report.


However, employers are less satisfied with the programs, citing declining participation rates among employees, in part because the impact of incentives such as cash and other rewards appears to be wearing off.


The report says more workers are completing basic health risk assessments without the need for incentives and that more employers are focusing on rewarding health behavior rather than participation in an employer wellness program.


Disease management presents a trickier problem, since employees enrolled in those programs tend to have more complex, chronic illnesses. Managing them will require insurers to better coordinate the care patients receive. 


Stein, who consults on health care issues for large employers, said companies are looking for insurers to help them manage their health care costs, especially through wellness and disease management programs, but that large insurers are less adept at changing quickly and offering new innovations.


The report, though, could galvanize insurers to do more for their customers, she said.


“I think there is pressure for them to improve,” Stein said of insurers. “It’s primarily the pressure they are feeling from their own customers. Most changes are made in the insurer world because their employer customers are demanding it.”


—Jeremy Smerd 



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Posted on January 19, 2010August 31, 2018

Health Care Unions Laboring to Unite

Imagine a time when health care unions were endlessly fractured, when labor leaders spent as much time launching public relations attacks and raiding parties against one another as they did trying to organize new workers.


It shouldn’t be too hard to imagine—that was the reality only a year ago.


Today, however, union organizers are banding together under new federations and cooperative anti-raiding agreements. Union leaders say they’ve been forced to grow larger to push their agendas in Washington and to compete with the ever-expanding corporate employers on the other side of the bargaining tables.


Organized labor, in other words, has discovered that its philosophy of workers finding strength in numbers can also apply at the organizational level as well.


Among the developments in the past year, two of health care labor’s most vehement enemies have signed and publicized a peace accord; six state nurse associations have banded together into a new federation; and three more large nurse unions have joined together to form what they’re calling the “super union” of nurses.


In the process, bitter enemies such as the AFL-CIO and the Service Employees International Union have suddenly found themselves with fewer degrees of separation.


“I think the staffing crisis across our industry, which is getting worse and worse because of chronic understaffing … is driving us to link arms with our sister unions,” says Mary Kay Henry, an international executive vice president with the SEIU, which represents more health care workers than any other labor group. “We think that’s necessary now more than ever because of health care reform.”


Experts say developments in Washington have presented many reasons for labor to join forces in support of a single agenda. That includes efforts toward the passage of the Employee Free Choice Act, which would simplify union organizing.


Then there are the pending Senate confirmations of three labor-friendly members of the National Labor Relations Board, and the already seated new secretary of labor, Hilda Solis. Unions are also keenly interested in the passage of health care reform legislation to constrain the insurance costs that have been devouring money that might otherwise have gone toward wage increases.


“They’re putting their differences aside because there’s a bigger prize, and they’re focusing on that,” says James Trivisonno, president of Detroit-based IRI Consultants.


For all the cooperation, though, the unions have not yet been able to leverage their newfound cooperative spirit into the ultimate goal—a larger share of health care workers being organized across the industry. Despite widespread expectations for health care union growth in 2009, workers have remained in a quiet period, with the overall number of union elections actually falling from the year before, according to IRI Consultants’ semiannual report.


In 2008, health care unions held 299 elections, winning 72 percent of them. But in the first half of 2009, only 113 elections were held, with labor winning 73 percent of them, the IRI report says.


Although the number of petitions for elections is on pace to exceed those in 2008, trends indicate that most of these will be withdrawn, dismissed or nullified before elections can take place. In the first half of 2009, 57 percent of election petitions were withdrawn.


Observers say health care union officials prefer to withdraw their petitions prior to elections if it appears they are going to lose a vote, which contributes to their higher-than-average success rate at the ballot box.


Also, IRI authors noted that most of the recent uptick in union petitions is attributable to an anti-SEIU breakaway union, the National Union of Healthcare Workers, which has seen nearly all of its petitions face legal challenges from the SEIU.


And for all the rhetoric about friendship and common goals, there remain several notable splits in the health care labor world that show no signs of repairing. The nurse “super union” actually formed after more than half of the members in one of the three founding organizations left the group in protest of then-ongoing merger talks with the large and ever-growing SEIU.


Standing together
Observers agree that President Barack Obama, who enjoyed huge union support in 2008, has made clear his desire for unions to set aside their differences and speak with one voice as they press for all the things they want from Washington. Former U.S. Rep. David Bonior, D-Michigan, in April 2009 convened the National Labor Coordinating Committee, in which the AFL-CIO, SEIU and nearly a dozen other labor leaders came together to talk about unification and common strategies.


“We stood together in support of Barack Obama and pro-worker candidates in 2008, and now stand together on the brink of passing both labor law and health care reform,” according to a July 8 statement from Anna Burger, chairwoman of the Change to Win coalition, a group of five unions, including the SEIU, that famously broke away from the AFL-CIO in 2005 in order to start more aggressive unionization drives.


The statement came a week before the joint committee was scheduled to meet with Obama to discuss labor policy issues.


However, it’s not clear that workers will buy into the new unity.


Union leaders say they don’t think their divisive past is a turnoff to new members, but those on the management side say it seems unlikely that workers being courted by organized labor will forget the inter-union bitterness, in which health care unions were raiding one another’s memberships or telling workers that it would be better not to be represented than to join a rival’s organization.


“They’ve spent so much time in the past fighting each other in particular areas, vehemently and with a lot of vitriol … that I think there’s a lot there for these new unions to overcome,” says Dan Rodriguez, vice president of labor relations for the 53-hospital Tenet Healthcare Corp., which has labor agreements with the SEIU and the California Nurses Association/National Nurses Organizing Committee.


The SEIU, by far the largest player in the industry with more than 1 million health care workers, has in particular been dirtied by mudslinging in its public battles with the California Nurses Association/National Nurses Organizing Committee, and with the National Union of Healthcare Workers. The SEIU has called a truce with the former and waged a public relations counterassault against the latter.


Nationally, union membership suffered while the unions stepped up their infighting.


Among all industries, union representation reached an all-time low in 2006, with just 12 percent of the workforce belonging to a union. In 2007, the union membership rate showed its first positive growth in more than two decades, rising slightly to 12.1 percent, according to the U.S. Bureau of Labor Statistics.


The Union Membership and Coverage Database, maintained by researchers Barry Hirsch and David Macpherson using BLS data, says 17 percent of hospitals’ 6.2 million workers were unionized in 2008, the most recent data available. Among nurses, nearly 20 percent of the 2.7 million registered nurses in the nation were unionized.


Although experts predict a much higher number of unionization petitions to be filed in 2009 compared with last year, it’s difficult to speculate how many would result in elections, let alone union victories.


As organized labor membership figures dwindled in part through the use of aggressive anti-union consulting by employers, unions have experienced a corresponding uptick in the aggressiveness of their own tactics, according to Rose Ann DeMoro, executive director of California Nurses Association/National Nurses Organizing Committee, which is regarded by management labor attorneys as one of the most aggressive unions to contend with.


“Union-busters end up feeding off the health care industry,” DeMoro says. “Weaker unions fall to the wayside in trying to confront that. … The more formidable organizations are the ones that have survived these times.”


Breaking away
One major outlier to the consolidation trend is California’s National Union of Healthcare Workers. The union is an Oakland-based breakaway organization led by former SEIU officials who were ousted by the international union over alleged financial irregularities after months of infighting.


The union’s officials want workers at California hospitals to decertify their SEIU units and join their new group. In the first six months of 2009, the union filed at least 82 petitions to form or decertify bargaining units, which was a major reason why California accounted for nearly half of all the petitions for union activity in the country in the first half of 2009.


Last week, the National Union of Healthcare Workers scored a success: Several thousand hospital and clinic workers employed by Kaiser Permanente voted to leave SEIU and join the upstart union.


In the closely watched election, the much smaller union overwhelmingly won three simultaneous disaffiliation votes, representing about 2,300 workers at Kaiser’s 412-bed Los Angeles Medical Center and more than 90 affiliated clinics in Southern California.


Although the changes causing the newfound optimism in the health care labor movement affect all kinds of bargaining units, the forces converging to organize nurses constitute a distinct movement within the industry.


In April, the nursing associations of six states—Montana, New Jersey, New York, Ohio, Oregon and Washington—banded together to form the National Federation of Nurses. All had formerly been affiliated with United American Nurses, a nurses-only union that began as an offshoot of the American Nurses Association.


On April 30, 2009, United American Nurses entered into a provisional affiliation agreement with the California Nurses Association/National Nurses Organizing Committee and the Massachusetts Nurses Association to establish an interim governing structure for a new “super union” called National Nurses United. United American Nurses officials said they had been meeting with the two groups since January 2009 to work out details for how to merge.


And on December 7, the new national union, comprising as many as 154,000 registered nurses, was formally created at a meeting in Phoenix. It selected Rose Ann DeMoro as its executive director


“I think the debate over health care [reform] probably finally pushed us to get here, but it’s something that we should have done a long time ago and it’s thrilling that we’re finally doing it,” said Karen Higgins, a staff nurse at Boston Medical Center and co-president of National Nurses United.

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