Category: Benefits

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IBM May Freeze U.K. Pension Plan

IBM is considering freezing the company’s U.K. defined-benefit plan by April 2010, according to an e-mail the company sent to employees.
The plan has been closed to new members since 1997.

IBM UK, based in Portsmouth, England, had £5.3 billion ($8.4 billion) in pension assets, according to the 2008 Pension Funds and Their Advisers reference guide.

IBM UK employees now enrolled in the DB plan will go through a 60-day consultation period beginning in August to switch to an enhanced defined-contribution plan. DB benefits already accrued are not affected.

“The rapidly rising costs and liabilities associated with the provision of defined benefit pensions is placing pressure on long-term ability to invest for future growth and operate in an intensely competitive global market,” according to the e-mail.

Under the current U.K. defined-contribution plan, IBM matches 8 percent of an employee’s salary when the employee contributes 3 percent of salary. The enhanced plan would increase IBM’s contribution to 10 percent, depending on the percentage of salary employees contribute themselves.

“Taking action to maintain competitiveness in the marketplace and introduce greater predictability to long-term pension provision costs, IBM U.K. communicated to its employees initiation of a consultation process regarding a package of pensions-related proposals,” according to an e-mail from an IBM spokesman in response to questions. “These proposals include enhancements to the defined contribution plan for all IBM UK employees, and closure of the defined benefit plans for existing members.”



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



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Hospitals Agree to Forgo $155 Billion for Health Reform

The nation’s hospitals agreed Wednesday, July 8, to give up $155 billion in future Medicare and Medicaid payments during the next 10 years, with those savings being used to help fund coverage for the uninsured as part of health care reform legislation.


The announcement of the agreement between the White House and the hospital industry came at a White House ceremony, with the deal announced by Vice President Joe Biden. President Barack Obama is traveling in Europe.


Biden, with officials from several big hospital trade associations at his side, was upbeat about the prospects of reform legislation being enacted this year.


“Reform is coming. It is on track. … We have never been as close as we are today, and things remain on track,” he said.


Still, the original timetable for consideration of health care reform hasn’t been met. For example, Senate Finance Committee Chairman Max Baucus, D-Montana, earlier said his committee would start to consider a bill in mid-June, but a bill has yet to be produced.


The Senate Health, Education, Labor and Pensions Committee, though, has been considering a draft proposal during the past few weeks. It isn’t known when that panel, which shares jurisdiction on health care legislation with the Finance Committee, will vote on a final bill.


In the House, the chairmen of three committees with jurisdiction on the issue unveiled a draft bill, but committee action on that proposal hasn’t begun yet. The HELP Committee and House chairmen’s bills, among other things, would require all but small employers to offer coverage meeting certain standards or be slapped with financial penalties.


Few details about the agreement between the White House and the hospital industry were released at the White House ceremony. The hospital industry, though, could stand to be a big winner if Congress approves a key element of health care reform legislation, moving the country closer to universal coverage.


More than 46 million Americans lack health insurance. If a big dent is made in that number, hospitals would see a significant reduction in the amount of uncompensated care they provide.



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


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Health Care Reform Legislation Priced at Under $1 Trillion, Officials Say

The Congressional Budget Office said a slate of legislative options shaped in the Senate Finance Committee could be priced under $1 trillion and expand coverage to 97 percent of Americans even while some Republicans expressed doubts.


“We are much closer on scores from CBO,” said Senate Finance Committee Chairman Max Baucus, D-Montana. “In fact, CBO now tells us we have options that would enable us to write a $1 trillion bill fully paid for.”


While a bill has yet to emerge from the committee, Baucus nevertheless said the number-crunching from CBO moves them closer toward a bipartisan agreement. Still, Sen. Orrin Hatch of Utah, a senior Republican on the Finance Committee, cautioned that the numbers could be premature and would likely change.


“You can’t really make decisions until you’ve seen the language and seen the scoring,” he said, referring to the CBO cost assessment.


The announcement follows a frantic couple of days in which key lawmakers have met behind closed doors in an effort to trim about $600 billion from a set of proposals that would be used to frame a broad bill to overhaul the U.S. health care system.


It also comes as President Barack Obama continued to seek public support for reform, an effort that included a televised town hall meeting at the White House on Wednesday, June 24.


Lawmakers from both parties declined to comment on specifics of how the bill would be paid for or which options were tweaked in order to lower the overall cost.


Senate Budget Committee Chairman Kent Conrad, R-North Dakota, however, said the committee had been able to reduce costs by lowering the amount of money the federal government would pay to help subsidize some Americans as they transition from one payer group to another.


“By altering those subsidy levels, you get the more favorable scoring that shows the bill can be paid for,” he said.



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


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Obama on Health Care Reform ‘Yes, We Can’

While the pace of developing health care reform legislation has slowed in Congress, President Barack Obama said Monday, June 22, that predictions that the drive is faltering simply aren’t true.


To those in Washington who say that “the sky is falling” on health care reform legislation, “I have to repeat, revive an old saying we had from the campaign: Yes, we can. We are going to get this done,” Obama said.


The president delivered his remarks at a White House event at which he announced an “understanding” in which the pharmaceutical industry would, assuming health reform legislation passes, reduce prices on brand-name drugs for low- and middle-income retirees receiving drug coverage through Medicare Part D.


The discount would apply to costs that fall within the so-called “doughnut hole”—a gap in coverage that kicks in for costs between $2,700 and $6,100.


Progress in developing health care reform legislation is moving slower than congressional leaders predicted earlier.


For example, Sen. Max Baucus, D-Montana, who chairs the Senate Finance Committee, said on several occasions that his panel would produce a bill by mid-June, with the full Senate completing action by the end of June.


The Finance Committee, however, has yet to unveil a bill. In the House, only a draft discussion measure has been developed and no committee votes have been scheduled so far on the proposal.



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


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House Democrats Outline Employer Mandate in Health Bill

Democratic leaders of three House committees formally started the health care legislative process on their side of Capitol Hill on Friday, June 19, by introducing a draft bill that would make companies cover employees or contribute to a national insurance fund.


The 850-page proposal is meant to serve as the foundation for the work that the House health, commerce and tax committees will do over the next several weeks to develop a final health care measure by the end of July. Hearings are slated to begin June 23.


The Senate Health Education Labor and Pensions Committee began hearings on its 615-page bill this week. The sessions have generated partisan tension, as Republicans complained of being shut out and questioned how the more than $1 trillion measure would be funded.


The Senate Finance Committee postponed hearings on its health care bill until after the congressional July 4 recess because of concerns about cost estimates that have been reported to be as high as $1.5 trillion.


The House draft measure depends in part on employers to foot the bill through what it calls “shared responsibility.”


Under the proposal, employers would pay 72.5 percent of the premium cost for full-time employees and 65 percent for a family policy while meeting minimum coverage standards.


If an employer does not offer health care, it would have to pay 8 percent of its payroll cost into a health insurance exchange, where individuals would be able to buy their own policies.


That exchange would include a so-called government-run public option, which Democratic leaders argue would provide competition to private insurers and lower premiums. Republican lawmakers have fiercely criticized the public option, calling it a step toward a federal takeover of the health care system.


The House committee leaders said their bill would cover about 95 percent of Americans. They do not yet have a cost estimate from the Congressional Budget Office.


“Our discussion draft is the first step in building a truly American solution that will reduce costs, offer real choice and guarantee affordable, quality health care for all,” said Rep. George Miller, D-California and chair of the House Education and Labor Committee.


Previewing their opposition at next week’s hearing, committee Republicans attacked the plan.


“From employer mandates that could cost workers their jobs to a government takeover that could cost patients their current coverage, Democrats are proposing a radical shift in how Americans receive health care—one that, unfortunately, puts government before people,” said Rep. John Kline, R-Minnesota and the ranking Republican on the House Education and Labor Committee.


But the leader of the House tax panel said that details like the 8 percent assessment on employers that do not offer health care coverage are open to negotiation.


“There is nothing locked in cement,” said Rep. Charles Rangel, D-New York and chairman of the House Ways and Means Committee.


In an interview after the June 19 press conference, Miller said the three House committees had reached out to the corporate community before drafting their proposal.


“Big businesses, small businesses met with us,” Miller said. “People have been very cooperative.”


He stressed that the House bill would not impede companies that want to offer health insurance, which many of them see as vital for recruiting and retention.


“Life is going to go on for them the way they want to do it,” Miller said.


Although they didn’t provide details about cost cutting or revenue provisions, the Democratic leaders asserted that the bill would not drive up the federal deficit, which now stands at $1.8 trillion.


“We don’t have the figures of how much this is going to cost,” said Rep. Henry Waxman, D-California and chairman of the House Energy and Commerce Committee. “But we’re going to pay for this bill.”


—Mark Schoeff Jr.


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Michelin Offering Early Retirement in France

Group Michelin is hoping to entice up to 1,800 workers in France to take early retirement, while at the same time stating it expects to hire up to 500 new workers a year the next three years.


Michelin is offering a package of early-retirement benefits to all of its employees in France, although the initiative is aimed primarily at those within five years of retirement, a Michelin spokeswoman said. The initiative is in addition to an offer tied to a restructuring of the firm’s manufacturing and research and development activities.


The aim of the early-retirement plan is to create vacant positions that can be filled by some of the 500 new hires Michelin expects to make each of the next three years.


The company also expects the initiative to rebalance the age profile of its workforce.


Michelin employs more than 30,000 people in France at 14 tire plants and other R&D, supply and logistics operations.

Filed by European Rubber Journal , a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Wellness, Prevention Likely to Survive Battle Over Health Care Reform

Even before health care reform legislation has been formally introduced on Capitol Hill, skirmishes have broken out regarding proposals to establish a government-sponsored insurance program, tax health benefits and mandate employer coverage.


But an area that has drawn high-profile activity by HR professionals—wellness and prevention—may survive the coming battle because it consistently draws bipartisan support.


A bill written by Sen. Tom Harkin, D-Iowa, would provide an annual $200 tax credit for each of the first 200 employees participating in wellness initiatives and $100 for each additional employee.


The Healthy Workforce Act requires that the wellness programs include three of the following four components: health education, participation monitoring, behavioral change and a supportive environment for healthy lifestyles.


Harkin is confident that the measure will be included in comprehensive reform bills that come out of the Senate Health, Education, Labor and Pensions Committee and the Senate Finance Committee.


The finance panel, led by Chairman Max Baucus, D-Montana, and ranking Republican Charles Grassley, R-Iowa, has jurisdiction over tax policy.


“Both Grassley and Baucus have been very supportive of it,” Harkin said before the Memorial Day congressional recess.


On Tuesday, June 9, in Washington, America’s Agenda, a coalition of businesses and unions, released what it calls “a consensus-based framework for sensible and achievable national health reform legislation” that emphasized, among other things, improved disease prevention and management.


John Butler, chief human resources officer at Textron, helped the group make the case for prevention. The Providence, Rhode Island, manufacturer has held its health care costs below the national average and has not increased employee contributions for its health care plan in the past five years.


The company consolidated 154 medical plans into one consumer-driven offering for salaried employees, instituted wellness programs, encouraged the use of generic drugs and generally squeezed inefficiencies out of its system, according to Butler.


As a result, the company has saved about $47 million annually since 2002.


“It’s not about cost shifting,” Butler said at a National Press Club event. “It’s about prevention.”


At the same press conference, Randy MacDonald, senior vice president of human resources at IBM, touted the value of prevention. Between 2005 and 2007, IBM invested $81 million in wellness programs and saved about $190 million.


“We genuinely believe that IBMers have become healthier,” MacDonald said via speaker phone from IBM headquarters in Armonk, New York. “Our employees also have become more productive and satisfied.”


Dow is another prominent wellness advocate. Janet Boyd, director of government relations tax and benefits, participated in the April press conference where Harkin introduced his bill.


Later that month, Gary Billotti, Dow’s global leader, health and human performance, spoke at the World Health Care Congress in Washington.


“We’re building a strong new culture of health, with prevention at the core,” Billotti said. “It’s become a part of our annual company sustainability goals.”


Billotti said that for every 1 percent improvement in health risk factors for Dow employees over 10 years, the chemical company saves $62 million in health care costs.


Dow spent $700 million on wellness programs in 2008 and had a 78 percent employee participation rate in health services activities, a 4 percent increase over 2007. More than 18,000 employees joined at least one of more than 1,800 group activities, a 14 percent increase over 2007.


Other companies that have brought a wellness message to Washington in the last two months include General Electric, General Mills and Campbell Soup Co.


As Congress begins the arduous process of cobbling together legislation, it should focus on areas where business, labor and many other groups aligned, said an America’s Agenda board member.


“This is the very best time to be bringing this consensus forward,” said Richard Gephardt, a former House Democratic leader. “We need to start where we agree.”


Inevitably, the process also will involve warfare—like the fight breaking out over whether to tax employee health benefits to help pay for reform.


“If we begin to tax employee benefits … there will be a mutiny at the gates,” MacDonald said. “It would be counterproductive and counterintuitive as well.”


A labor official chimed in on the same point.


“It will be a revolution at the gate, if they talk about taxing existing benefits,” said Terry O’Sullivan, general president of the Laborers International Union of North America.


—Mark Schoeff Jr.


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Ohio Senate Rejects Health Care Coverage Proposals

The Ohio Senate has rejected Gov. Ted Strickland’s proposals that the state Insurance Department said would have provided access to affordable health care insurance for thousands of state residents.


The Senate’s decision Wednesday, June 3, axed the governor’s proposals in the Insurance Department budget that the agency said would have given 110,000 state residents access to private health insurance.


Further, it nixed proposals that would have reformed health insurance open enrollment programs and extended state continuation of health care coverage for employees of small businesses who lose their jobs.


More than 1.3 million Ohioans are uninsured, Mary Jo Hudson, director of the Ohio Department of Insurance, said in a statement.


Specifically, in Amended Substitute House Bill 1, the Ohio Senate removed Gov. Strickland’s proposals that would have reduced the rates insurers can charge people with pre-existing conditions from an average of $800 a month to less than $400, according to the state Insurance Department.


Further, the Insurance Department said the proposals would have required employers to offer uninsured employees the opportunity to purchase coverage with pretax dollars through flexible spending plans, which it said would save up to 40 percent off the cost of coverage for the employees and their families by reducing the income taxes they pay.


Also, the proposals would have extended the state continuation coverage, which operates similar to COBRA.


Employees can use this if they are not eligible for COBRA. This would have extended the coverage from six to 12 months, allowing employees of small businesses that lose their jobs to maintain health insurance for themselves and their families at their own cost.


After December 31, people who work in small businesses will be able to purchase health insurance through their former employer for only six months.


In a statement, Hudson said she hopes members of the Ohio Senate “will reconsider this rejection” when it and the state House of Representatives hold conference committee meetings June 11 and 18.



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


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Telling the Truth About Rewards Programs

leave management, PTO, vacation, PTO

John Stumpf, CEO of Wells Fargo & Co., should be applauded for the ad he took out in The New York Times, The Washington Post and The Wall Street Journal. In the full-page, letter-style ad, he boldly stated that enough was enough and proclaimed that the bank had a right to reward its top performers. Stumpf reminded those who have forgotten—or never knew—that in the free enterprise system, it is a best practice to give people rewards for reaching targeted financial goals. Simply, it is the norm when running a profitable company.

Senior leaders who “get it” know that genuine recognition practices, strategic rewards and incentive programs not only move performance up the scale but reinforce the organizational culture. These executive leaders understand the dynamics required to drive up productivity, optimize sales performance and generate an engaged workforce that will go the extra mile to get the job done.

In the case of Wells Fargo, we are speaking about rewarding frontline employees, from tellers to mortgage salespeople to financial advisors to top bankers. The company remained profitable throughout most of 2008, and the employees it sought to recognize with a trip performed their very best, and no doubt this conference trip was an incentive for them.

While Wells Fargo did not need nor request the Troubled Assets Relief Program bailout monies, it did nevertheless receive $25 billion, and has said that it has used the money to fund loans and help homeowners avoid foreclosure. Stumpf points out that the costs of this now-canceled conference were to be paid from the profits generated from this division, and not from the bailout monies that Wells Fargo was using to protect homeowners facing foreclosure.

But however well-deserved the trip was, Wells Fargo has canceled it, and perhaps it did so in an effort to find the right balance in doing the right thing. It doesn’t help that the news about Wells Fargo’s conference comes just a few months after the infamous AIG luxury spa retreat last October at the St. Regis Resort at Monarch Beach, California.

The AIG conference took place one week after the failing company got an $85 billion bailout. AIG executives were brought before Congress to account for the $440,000 spent on manicures, pedicures, massages and facials as well as the room and meal costs. What Wells Fargo had in mind was something very different. But all recognition is now being tarred with the same brush. And that’s too bad.

Instead of taking an easy (and inaccurate) cheap shot, the media should instead look at what recognition and rewards can bring to the table in an ailing economy. All of us have to understand that employees who are recognized are the very employees who stay after hours to get goods out to a customer or finish time-sensitive paperwork. When employees feel respected and appreciated for what they contribute, they are less likely to quit, or become so disaffected that they face firing. They’re likely to be more productive, in other words.

“Total rewards” in the compensation and benefits industry consists not only of salary and bonuses, 401(k) and dental plans, but also incentive programs and awards for achieving various results. When employees are urged to be the best of the best in achieving some performance metric, whether measured by the attainment of a financial goal or another key business outcome, they know there is usually provision for them to be acknowledged and often to be rewarded.

This incentive is at work (or should be) not only for the sales-makers and deal-doers, such as the people Wells Fargo sought to reward. In any organization, there also are support staff who solidly work in the trenches, who consistently live the company values and who serve clients the way we all would like to be treated. While there might not be a direct line from these folks to sales made or dollars earned on the company scoreboard, they go above and beyond in their daily work and deserve to be recognized.

Some people might argue that their salary should be enough, but that is like telling a customer that inventory sitting on the stores shelves should be enough for their shopping experience. We almost always prefer to shop where someone tastefully and tactfully assists us in the fitting room, finding matching accessories or offering suggestions on color or style. Just as stores need customer loyalty, so do companies need employee loyalty. And rewarding and recognizing employees (beyond salary) is what gives every business the competitive edge—that is, it gives them a motivated workforce.

Stumpf reminded readers of that in his ad: “Events such as this are the heart of our culture because our product is service, delivered by caring, energized, talented, loyal team members who earn competitive, fair wages and benefits.”

Fairly or not, in the wake of the media backlash against Wells Fargo and other companies, every organization will now need to more carefully examine its rewards programs and recognition practices. Companies must make sure that their culture—the values and beliefs they espouse—are front and center, and that they are driving recognition activities or rewards programs and events.

The business activities that will be rewarded with a trip or some other big-ticket incentive need to be very clearly defined. When behaviors are consistent with the values, and when they help accomplish goals, no one can argue with a performance metric that has been achieved. If you can measure the change in performance, then you can boldly state that the individual deserves the promised reward.

Recognition events such as the one Wells Fargo had planned will need to have better and more solid business purposes behind them—something besides the fun and relaxation associated with being at a nice place. In better days, half the thrill of these conferences is being able to go with a spouse or partner to a place that you might not otherwise have been able to afford. But like it or not, that fun factor isn’t enough right now.

If the money pot really is dry, or if an organization’s ethics and values simply state that a recognition conference is not the right thing to do—whether because of the economy or because the company got an infusion of taxpayer money — you simply have to explain the situation to your employees.

Most important, you must still make the time and make the effort to express the best “thank you” that you can for the contributions employees have made. Tell them how their efforts have made a difference and how they will continue to help turn this troubled economy around.

Those simple words — thank you — can make a world of difference. And no one can take a potshot at that.

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Stimulus Bill Includes Unemployment Insurance Update

employee rainy day savings

The country’s 74-year-old unemployment insurance system could be getting a face-lift soon.

As part of the economic recovery package making its way through Congress, the federal government would boost jobless benefits this year by $25 per week as well as spend billions to encourage states to modernize their unemployment insurance programs.

Economic stimulus legislation approved last week by the House Ways and Means Committee would give states incentives to make it easier for part-time workers to qualify for unemployment benefits and provide benefits to people leaving work for a “compelling family reason.” That bill was slated to be folded into the broader American Recovery and Reinvestment Act for consideration by the full House this week.

The sweeping $825 billion legislation reflects priorities outlined by President Barack Obama, who hopes to sign a recovery plan into law within a month.

Changes to unemployment insurance woven into the package can’t come too soon for observers who say the nation’s safety net is showing its age. At a time when legions of Americans are losing their jobs and the economy is teetering, critics say the jobless benefits program is fraught with problems, including inadequate funding, skimpy benefit payments and fusty eligibility requirements that haven’t evolved with the workplace.

An update to the system is a win-win for workers and employers, says Rep. Jim McDermott, D-Washington, who has been a leading advocate for unemployment insurance reforms.

“We can’t adequately help the unemployed and our economy just by pumping resources into an unemployment program that is not designed for today’s crisis,” McDermott said in a statement this month. “When we enable more unemployed workers to qualify for the unemployment insurance program, we put cash into the pockets of struggling families who will spend this money in their communities, supporting local jobs and businesses.”

Others are wary of efforts to overhaul the unemployment insurance program, which took shape in 1935 as part of the New Deal. Calls for higher funding levels and bigger benefit checks eventually could mean tax increases on businesses. And not everyone likes the modernization legislation, partly because provisions in it blur the line between jobless benefits and social welfare policy.

The original purposes of unemployment insurance are diluted by giving someone unemployment benefits when they leave work to care for a family member, says Larry Temple, executive director of the Texas Workforce Commission. “This isn’t a social services program,” says Temple, whose organization runs unemployment insurance in Texas. “It’s not a welfare program.”

The debate over unemployment policy has taken on greater urgency because of the recession. Some 1.9 million U.S. payroll jobs were lost during the last four months of 2008, and the unemployment rate rose to 7.2 percent in December. The amount of time people remain out of work also is growing, from an average of 16.5 weeks in December 2007 to 19.7 weeks in December 2008.

Droves of Americans are applying for unemployment insurance benefits, which are available to workers who are unemployed through no fault of their own and meet eligibility requirements set by states. For the week ending December 27, continued claims—that is, the number of people requesting a weekly benefit check after having established eligibility—topped 4.6 million, the most since 1982. For the week ending January 10, the preliminary figure for continued claims was slightly lower but still more than 4.6 million.

Among other things, the American Recovery and Reinvestment Act includes $27 billion to continue the current extended unemployment benefits program—which provides up to 33 weeks of extended benefits—through 2009.

In addition, the legislation approved by the Ways and Means Committee would give $7 billion in incentive payments to states that have, or would adopt, certain features in their unemployment insurance programs. Chief among the reforms specified in the act is use of an “alternative base period.” This is designed to get states to consider a person’s earnings in the most recent completed quarter when determining eligibility—which can help lower-wage workers qualify for benefits.

For a state to obtain additional incentive funding under the measure, its unemployment law would need at least two provisions from a list of other reforms. The possibilities include allowing people seeking part-time work to qualify for benefits and not disqualifying individuals from jobless benefits if they’ve left work for a “compelling family reason,” including cases involving domestic violence and the illness or disability of a member of the individual’s immediate family.

—Ed Frauenheim