Category: Benefits

First lady Michelle Obama urged companies to implement policies that will help their employees better balance work and family obligations during an appearance at the Department of Labor on Thursday, January 14.

In an address to about 400 Labor Department employees, Obama also promoted legislation that would guarantee paid sick leave, a measure that has generated concern among HR organizations in Washington.

Obama has been touring government agencies during President Barack Obama’s first year in office, giving pep talks to staff members.

At the Labor Department, Obama touched on an issue that has been central to her professional life—simultaneously managing the demands of home and the workplace.

Obama achieved success as a Chicago lawyer while her husband built his political career. They also started a family, having two girls, Sasha and Malia, who are now in grade school.

Drawing parallels to other working mothers, Obama called herself a “120-percenter.”

“So when I was at work during these times, I always felt like I was shortchanging my girls,” she said. “But then when I was at home, I was worried that I was letting people at work down. And with that kind of anxiety comes a lot of additional stress and a whole lot of guilt.”

Such worries undermine work performance, Obama said. She argued that flextime, telecommuting and paid time off produces happier employees and more profitable companies.

“Instead of spending all day at work worrying about what’s happening at home, they have the support that they need to concentrate on their jobs,” Obama said.

Although many employers have established good work/life benefits, too many Americans don’t have access to flexibility policies, Obama said.

“Staying home to care for a sick child or taking an elderly parent to a doctor’s appointment shouldn’t mean risking one’s job,” Obama said. “Things like paid family leave and sick days and affordable child care should be the norm, not the exception.”

She said that 40 percent of private-sector employees work for companies that don’t provide paid sick days. She endorsed the Healthy Families Act, a bill that would enable employees to earn up to seven paid sick days per year to care for themselves or a loved one.

“We are happy that we have a president and a secretary of the Department of Labor who had the vision and the foresight to see that this now needs to happen,” Obama said.

The Society for Human Resource Management and other HR organizations have expressed concerns that the measure could undermine paid-time-off programs that companies currently have in place.

SHRM is promoting a leave concept that would protect companies from federal leave mandates if they offer PTO.

Following her speech, Obama visited the Labor Department’s Child Development Center. The facility provides day care for the children of department employees and area families.

“As a parent, I know centers like this one create a great deal of peace of mind,” Obama said. “That means that you can focus on your work and not worry about whether your kids are doing OK.”

Obama fielded questions about her daughters from an exuberant group of 5-year-olds before reading them the Dr. Seuss story Green Eggs & Ham.

—Mark Schoeff Jr.

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Labor leaders struck a deal Thursday, January 14, with Democrats that would help unionized workers and retirees avoid an excise tax on high-cost health care plans, clearing a major political hurdle for the passage of health care reform.

Employer groups have also opposed the tax and said that the deal would benefit unionized workers at the expense of nonunion employees.

The bill would exempt the so-called “Cadillac” plans attained through collective bargaining; Taft-Hartley multiemployer plans; and all employees who are part of a state-employer health plan from being taxed until January 2018.

The agreement would raise the threshold at which benefits would face a 40 percent tax to $24,000 for family plans from the $23,000 passed in the Senate health reform bill, said AFL-CIO president Richard Trumka during a conference call with reporters Thursday. The threshold for individual plans, formerly at $8,000, would be raised by a similar amount.

Beginning in 2015, dental and vision benefits would be excluded from a plan’s taxable value.

“I think we’ve made some changes for middle-class America that I think will be very, very beneficial,” said Trumka, who was joined by leaders of major labor unions to announce the deal. “We don’t look at this as the end of that fight for real reform, but another step along the way to real reform.”

The plan would also raise the tax threshold for older Americans and for women, who tend to have higher health care costs than men do. That provision would be applicable to all plans.

The deal maintains a raised threshold for employees in high-risk professions, such as police and firefighters. And it would maintain the higher taxable threshold for plans in states where health care costs are higher. The threshold for plans in those states would be 120 percent of the maximum, an amount that would be phased downward beginning in 2014.

The deal would also allow health plans of unions, multiemployer plans and retiree plans run by voluntary employee beneficiary associations to purchase insurance on the health insurance exchanges beginning in 2017.

Employers say the deal raises concerns of fairness for nonunion workers.

“It will give a huge advantage to unionized plans over nonunionized employers,” said James Gelfand, senior manager for health policy at the U.S. Chamber of Commerce.

While employers have opposed the tax on the grounds it would hurt employees, the tentative deal would ultimately reduce the amount of money the excise tax would raise to help pay for the nearly $1 trillion health care bill.

The tax as originally detailed would have raised $150 billion toward paying for health care. Labor leaders said the changes would reduce revenue by $60 billion.

“One of the concerns we all have right now is how much revenue is lost,” says Martin Reiser, chairman of the National Coalition on Benefits, an organization composed of 200 employers and employer groups—including Xerox, UPS and Target—and such organizations as the American Benefits Council, the National Association of Manufacturers and America’s Health Insurance Plans. “I think these changes are all positive. But what are they going to do to make up that lost revenue?”

Legislators are expected to send the new details to the Congressional Budget Office to determine the impact on the bill’s total cost. President Barack Obama has vowed to sign a bill that does not increase the federal deficit.

New revenue could be raised by increasing a 5.4 percent tax on high-income earners and extending the tax to investment income, sources say.

Labor leaders were able to increase the rate at which the threshold would grow with inflation, but concerns remain among employers that more people will face taxes on benefits if health care prices continue to widely outpace inflation.

The new deal would raise the taxable threshold to the Consumer Price Index plus one. Labor leaders said that if health care inflation grew faster than expected from 2010 to 2013, the taxable threshold also would grow.

Generally, the politics of reconciling the health reform bills passed separately by the House and Senate favor the Senate, since its 60-vote, filibuster-proof majority must remain intact for any plan to pass.

As a result, observers say many of the elements in the House bill are likely to die, including a government-run insurance plan known as the public option and an employer mandate to provide insurance or face up to an 8 percent tax on payroll. In its place would be a so-called “free rider” penalty against employers with employees who receive federal subsidies to pay for health care.

—Jeremy Smerd 

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Health care spending in the U.S. grew 4.4 percent in 2008 to $2.3 trillion, the slowest rate of growth in nearly 50 years, the Centers for Medicare and Medicaid Services reported.

Spending growth was down from 6 percent in 2007 as spending slowed for nearly all goods and services, according to the report, “Health Spending at a Historic Low in 2008,” published in the journal Health Affairs.

Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared with 5.9 percent in 2007, “the slowest rate of growth since 1998,” CMS statistician Micah Hartman, who co-authored the report, said at a briefing to discuss the findings. Nevertheless, 31 percent of the nation’s health care money went to hospital care in 2008, making up the largest percentage of spending, followed by other spending (25 percent) and physician and clinical services (21 percent).

The economic downturn significantly affected health care spending, resulting in more Americans going without care and making it more difficult for people to afford private insurance.

“Health care spending is usually somewhat insulated from the immediate impact of a downturn in the economy. But this recession has exerted considerable influence on the health care sector,” Hartman said.

Private insurance benefits and premiums in 2008 grew at their slowest rate since 1967, while public programs such as Medicare and Medicaid grew 6.5 percent, the same rate as in 2007. Retail prescription-drug spending slowed to 3.2 percent in 2008, reflecting a decline of per capita use of prescription medications.

Despite slower growth, health care spending continued to outpace overall economic growth, which was 2.6 percent in 2008 as measured by the gross domestic product.

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

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While eleventh-hour congressional action extending a COBRA premium subsidy law assures continuation of the subsidy for millions of laid-off workers and their families, it also means more work for employers.

Ending weeks of uncertainty, Congress gave final approval and President Barack Obama signed into law late last month a Department of Defense spending bill that includes provisions extending COBRA premium subsidies.

Under the measure, H.R. 3326, the nine-month 65 percent premium subsidy—established by an economic stimulus measure Congress passed early last year—would be extended by six months to 15 months for employees involuntarily terminated from September 1, 2008, through December 31, 2009.

In addition, workers who lose their jobs through February 28, 2010, would be eligible for the 15-month subsidy. Without an extension, employees who lose their jobs after December 31, 2009, would not have been eligible for the subsidy.

The extension of the subsidy will provide significant financial relief to employees who lose their jobs and group health insurance during the first two months of this year, as well as the hundreds of thousands of individuals who have collected the subsidy for nine months and had lost or were soon to lose the subsidy.

“Losing one’s job is difficult enough. But losing one’s health care along with it and worrying about being able to get treatment for oneself and one’s family, or fearing bankruptcy in the event of injury or illness is something Americans should not have to cope with in this difficult time,” U.S. Rep. Joe Sestak, D-Pennsylvania, said in statement. Sestak previously introduced a COBRA premium subsidy extension measure, a portion of which was incorporated into the military spending bill.

The extension will mean more work for employers and their COBRA administrators.

For example, many employers in late November began sending bills to COBRA beneficiaries whose eligibility for the subsidy ran out, asking beneficiaries to pay the full December premium rather than 35 percent of the premium.

Those employers now will have to calculate the overpayments and decide to either offset future COBRA premium payments by the amount of the overpayments or issue refund checks.

A more complicated procedure involves beneficiaries whose eligibility for the subsidy ended in November and who didn’t pay the full unsubsidized December premium.

Under the legislation, those individuals—if they paid their 35 percent share of the premium in the month prior to losing the subsidy—will have a right to pay 35 percent of the premium later and receive retroactive coverage. Beneficiaries could receive retroactive coverage if they pay the 35 percent share within 60 days of the bill’s enactment or, if later, 30 days later after their former employer sends them notice that describes the new 15-month premium subsidy.

That will require employers and COBRA administrators to identify beneficiaries whose eligibility for the subsidy ended, send them the required notice and, assuming they pay the required premium, retroactively restore their COBRA coverage.

Some employers and plan administrators may ease this complication by expediting notice to participants about the subsidy extension and sending out a revised billing statement, said Karen Frost, a health and welfare outsourcing leader for Hewitt Associates in Lincolnshire, Illinois.

COBRA premiums aren’t due until 30 days from the start of a monthly coverage period. So, if they received rapid notice, beneficiaries would have time to make their December premium payments reflecting the 65 percent federal subsidy.

The legislation also requires employers to send a special notice that describes the 15-month subsidy to all beneficiaries who are eligible for a premium subsidy who are on COBRA beginning on or after November 1, 2009.

“That will create work. Language will have to be developed for the notification document. And you will have to identify everyone affected and send them the notification. That is not a small effort,” said Linda Anderson, benefit administration consultant at Towers Watson & Co. in Chicago.

On the other hand, the legislation ends a problem created by the original subsidy law. That law required individuals to satisfy two conditions to be eligible for the premium subsidy: They must have been involuntarily terminated from September 1, 2008, through December 31, 2009, and they must have been eligible to receive the subsidy during that period.

That second condition was not widely understood and may have resulted in employees laid off in December not being eligible for the subsidy.

That could happen in situations where employers allowed laid-off employees to continue regular group coverage through the end of the month. As a result, those individuals would not be entitled to the subsidy because their COBRA eligibility didn’t begin until January 1, 2010, one day after the cutoff date.

The military spending bill ends what some experts say was a fairness issue by amending the law to tie subsidy eligibility to the date of involuntary termination.

And any additional work the new legislation creates is a fraction of the burden that employers incurred under the original law, Anderson notes. In that case, employers had to locate and provide notice of the COBRA subsidy to former employees who, in some cases, hadn’t worked for them in half a year, while employers, at first, did not have official guidance on what constituted involuntary termination.
The new COBRA subsidy extension, though, may not be the last, especially if unemployment remains high.

“This may not be the end of it,” said Rich Stover, a principal with Buck Consultants in Secaucus, New Jersey.

The likelihood of a future extension will depend on where the unemployment rate goes in the coming months, said Anderson of Towers Watson.

Statistics are not available on how many laid-off employees took the subsidy. But a congressional Joint Committee on Taxation report, developed when Congress approved the initial subsidy, estimated that the subsidy would benefit about 7 million laid-off workers and their families at a cost of about $25 billion.

One survey found that the subsidy resulted in a surge in COBRA enrollment rates. Hewitt Associates reported last August that the COBRA opt-in rate for terminated employees more than doubled after the subsidy program.

From March 1, 2009—when the subsidy generally first became available—through November 30, 2009, monthly COBRA enrollment rates for laid-off employees averaged 39 percent, according to a Hewitt analysis of COBRA enrollment among 200 large employers.
By contrast, from September 1, 2008, through February 28, 2009, an average of 19 percent of involuntarily terminated employees were enrolled in COBRA.

“There is no question that the subsidy has made a difference. It has been of huge value,” Frost said.

With nonsubsidized COBRA premiums often about $400 a month for individual coverage and $1,200 a month for family coverage, the subsidy slashed health insurance premium costs for beneficiaries when they no longer had a regular source of income.

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

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With a filibuster-proof majority intact, Senate Democrats are poised to approve an $871 billion health care reform bill containing small but consequential last-minute changes for employers.

Following a procedural vote early Monday, December 21, it appears Democrats are likely to pass the measure by the holiday recess. The effort to reshape health care coverage would resume in 2010 when the separate reform bills passed in the House and Senate will have to be reconciled into one piece of legislation.

Over the weekend, Democratic leaders in the Senate introduced the final changes they had made to the bill. One amendment that rankled employers is a new rule that would allow certain employees to cash out of their employer-sponsored health insurance and use their employer’s health care money to buy insurance on their own.

Employees who spend between 8 and 9.8 percent of their income on insurance premiums would qualify for the “free choice voucher,” as it is called by the amendment’s sponsor, Sen. Ron Wyden, D-Oregon. Wyden has long favored severing ties between employment and health insurance coverage, and the amendment would allow certain employees to buy their own coverage with employer money.

Other amendments likely to be of interest to employers:

• A requirement that employers limit waiting periods before an employee can enroll in an employer health plan to 60 days or face a fine of $600 per full-time employee.

• A requirement that the secretary of health and human services determine whether contributions to health savings accounts count toward the actuarial value of a plan. This would clarify whether certain high-deductible plans would meet the legislation’s minimum actuarial value of 60 percent—meaning a health plan would have to pay 60 percent of the cost of insurance.

• A study by the secretary of health and human services of the differences between self-insured and fully insured health plans to determine whether the new health care reform laws create adverse selection—a scenario in which only those who use a lot of medical care, namely the sick and older people, sign up for a group health plan. Employer groups are concerned this study will create political pressure to prohibit employers from self-insuring.

• An increase in a payroll tax from 0.5 percent to 0.9 percent for individuals making $200,000 or more and couples making $250,000 or more a year to help pay for Medicare’s hospital insurance trust fund. Employers have criticized the amendment as a tax on small businesses structured as tax pass-through entities, such as S corporations.

• An appropriation of $200 million to small businesses that want to establish work-site wellness programs.

The Senate health care reform plan would newly insure 31 million people and reduce the federal deficit by $132 billion over a 10-year period ending in 2019. While considerably less onerous on employers than the reform bill passed by the House in November, the Senate bill would come with new employer requirements and penalties.

Employers with 50 or more full-time employees that do not offer health insurance would face a penalty of $750 per full-time employee if an employee receives a premium subsidy from the federal government.

Individuals would be required to carry insurance or face a fine.

—Jeremy Smerd

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Days after British authorities unfurled a 50 percent tax on most banker bonuses and French and German officials threatened to follow suit, Goldman Sachs tried to defuse rising public anger over big Wall Street payouts by saying its top 30 executives wouldn’t receive cash bonuses this year.

But since the move leaves Goldman ample room to shower its remaining 31,000 employees with an estimated $20 billion in bonus cash, it’s unclear whether the announcement will succeed in defusing tensions surrounding Wall Street pay in general and Goldman in particular.

The moves, however, figure to be widely imitated throughout Wall Street, where Goldman is the undisputed leader in pay—and profits.

Instead of awarding cash, Goldman said bonuses to the Top 30 would be made in the form of shares that can’t be sold for five years. Yet since shares have long since constituted the lion’s share of bonus pay for the higher-ups at Goldman, this change is less dramatic than it might initially seem.

Goldman also took a step toward addressing the problem that bankers don’t suffer financially for mistakes that become apparent only long after a deal or trade is struck.

The firm created what it called an “enhanced recapture provision” that would allow it to claw back previously granted compensation if it’s determined that the pay was based on “materially improper risk analysis” or if the employee “failed sufficiently to raise concern about risks.”

Goldman also said it would allow shareholders to vote on whether they approve of the company’s compensation practices. While such a move may sound like a significant concession, the vote in fact would be nonbinding.

None of Goldman’s five highest-paid employees received cash bonuses last year. In 2007, chief executive Lloyd Blankfein and co-presidents Gary Cohn and Jon Winkelried each reached about $27 million in cash bonuses. Generous as those payouts were, they were a minority of their total compensation of more than $70 million each.

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

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Eighty-three percent of 153 large U.S. companies with defined-benefit plans surveyed by Hewitt Associates say they expect to make additional contributions to their pension plans, with 11 percent of those contributing saying those contributions will have “a significant impact on their business,” according to a news release.

However, 31 percent of respondents said they are more likely to consider closing their plans today than they were 18 months ago, up from 11 percent in 2008. Similarly, 50 percent said they are more likely to consider freezing their plans to existing participants, surging from just 17 percent in 2008.

Twenty percent of the companies surveyed were more likely than last year to consider delegating their entire investment policy to professional advisors, up sharply from 4 percent the year before.

Almost 40 percent reduced their equity exposure over the past year and 37 percent increased their holdings of corporate bonds.

Also, 15 percent implemented “dynamic investment policies,” rebalancing their asset allocation policies as their plans’ funding status improves.

The survey was conducted in September and October.

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

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