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Two government agencies will work together more closely to strengthen oversight and regulation of retirement-savings products, according to an agreement signed Tuesday, July 29.

The Department of Labor and the Securities and Exchange Commission signed a document that permanently establishes the information-sharing arrangement that they have been developing over a number of years.

According to the memorandum of understanding, staff from the labor agency’s Employee Benefits Security Administration and the SEC will meet regularly to discuss industry trends and regulations. Each agency will grant the other access to nonpublic enforcement information under their purview.

The Labor Department regulates 401(k) and other types of retirement plans, and the SEC monitors brokerages, investment firms and mutual funds.

The agencies must increase their cooperation to keep pace with quickly evolving financial markets, said SEC Chairman Christopher Cox.

“Our markets are becoming more integrated,” Cox said at a Washington press conference.

Bolstering oversight is becoming urgent as companies replace defined-benefit plans with defined-contribution products that require employees to navigate markets on their own.

“Things have matured to the point that this is an important step to take today,” Cox said. “This will be a great, great thing for American investors.”

Appearing alongside Cox, Secretary of Labor Elaine Chao emphasized the importance of protecting nearly $2.3 trillion in defined-contribution assets invested by about 65 million workers.

“We want to enhance retirement security,” Chao said. “Having our agencies work together goes toward that goal.”

J. Mark Iwry, who was responsible for overseeing regulation of the private pension system as a Treasury Department official from 1995 to 2001, applauded the DOL-SEC partnership.

“Good government that helps sustain confidence in the retirement system involves a continual process of breaking down the silos that tend to build up around different government agencies,” said Iwry, a nonresident senior fellow at the Brookings Institution in Washington and a principal of the Retirement Security Project.

A recent example of a combined Labor-SEC activity was an alert about 401(k) debit cards. Investors were warned that if they borrow and spend from their retirement accounts, they will have to repay the money by a certain deadline or be hit with taxes and penalties.

That kind of effort is needed more than ever with the growing popularity of defined-contribution plans, Iwry said.

“As 401(k)s and IRAs account for an increasing share of retirement savings, it is increasingly imperative for American savers to get adequate disclosure and user-friendly information,” he said.

Last week, the Labor Department issued a regulation requiring greater transparency from 401(k)-type plans to participants regarding investment returns, fees and expenses.

—Mark Schoeff Jr.

The full Senate this week may consider mental health care benefits parity legislation as part of a broader tax bill, but prospects for that bill are uncertain, lobbyists say.

Senate Finance Committee Chairman Max Baucus, D-Montana, attached the parity provisions—drawn from an informal agreement between congressional negotiators who worked out differences between House- and Senate-approved parity measures—to the tax bill, S.B. 3335.

Like earlier parity measures cleared by the House and Senate, the parity provisions in the tax bill would require group health care plans to provide the same coverage for mental disorders as they do for other medical conditions.

That would be a big change from current law, which bars discriminatory annual and lifetime dollar limits on mental health care coverage but allows discrimination in other ways, such as letting plans pay only 50 percent of mental health care expenses while they cover 80 percent of expenses for treatment of other medical problems.

However, business lobbyists said the tax bill—for reasons unrelated to the parity provisions—is unlikely to get the 60 votes needed to stop Senate floor debate on it, effectively delaying a final vote on the bill. Lobbyists said the measure, which among other things extends numerous expiring Tax Code provisions, is likely to be considered again when the Senate returns in September after the congressional August recess.

A tax extender bill earlier approved by the House does not include provisions for mental health benefits parity.

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

The governor of Massachusetts says employers should pay more to help fund the burgeoning cost of moving the state closer to universal health insurance coverage.

Employer groups are troubled by the proposed change, which will impose a hefty financial assessment on employers, such as many retailers, that have long waiting periods before new employees are eligible for health coverage. Under current rules, many such companies are exempt from the penalty.

Gov. Deval Patrick last week proposed that state regulators tighten an existing rule that requires employers with at least 11 full-time employees in the state to pass one of two tests to prove they are making a “fair and reasonable” health insurance premium contribution to avoid an annual assessment of $295 per employee.

Revenue from the assessments, which is running much lower than earlier projections, is used to subsidize premiums in a state program—one of the linchpins of Massachusetts’ 2006 landmark health care reform law—that provides coverage for eligible low-income uninsured residents.

Under the current rule adopted in 2007 by the Massachusetts Division of Health Care Finance and Policy, an employer is exempt from the annual assessment if at least 25 percent of full-time employees are enrolled in its group health insurance plans.

If that primary test is not met, employers that pass a secondary test—by paying at least 33 percent of the premium for individual coverage for employees within 90 days of their beginning work—are exempt from the assessment.

Nearly all employers in the state offering coverage have been able to pass one test or the other.

Under Patrick’s proposal, though, employers would have to pass both tests to be exempt from the $295 assessment, a change that would result in many more employers being forced to pay, state business groups say.

The tightening of the so-called Fair Share Contribution rule is intended to raise $33 million in new revenue, up from the roughly $7 million that was generated during the first fiscal year that the tests were imposed.

If, however, revenue produced from the Fair Share tests falls short of $38 million, the governor is proposing that the Division of Health Care Finance and Policy should have the authority to raise the assessment to a level it projects would meet the revenue target. Such a change, though, would require legislative approval.

Tightening the Fair Share rules is one of several proposals Patrick presented last week to state legislators to generate more than $100 million in new revenue to pay for increasing costs of subsidizing health insurance coverage for the uninsured. Those costs are projected at $869 million for fiscal 2009, up from $647 million in fiscal 2008. Other proposals would impose new assessments on health insurers and hospitals.

Those increased contributions—which Patrick described in remarks he made at a budget signing ceremony as “modest”—from employers, insurers and providers are in the “same spirit of shared responsibility” in which premiums and co-payments for enrollees in the state-subsidized health insurance program were boosted. Business groups, though, say the changes are anything but modest.

While slightly more than 1 percent of employers with at least 11 full-time employees paid the assessment during the first year the assessment was in effect, business lobbyists say that percentage will climb, though it isn’t known by exactly how much.

“Some employers are really going to be hit,” said Rich Stover, a principal with Buck Consultants.

The industries most likely to be affected are retailers and restaurants, which because of high turnover often impose waiting periods well in excess of three months for new employees, said J.D. Piro, an attorney with Hewitt Associates.

Some business groups view the Fair Share test tightening as a betrayal in which the rules are being changed in midstream.

“This is bait and switch,” said Bill Vernon, state director of the National Federation of Independent Business in Boston. “We’re stunned that this would be proposed a couple of years down the road.”

Other business leaders say employers have done more than their fair share in helping Massachusetts achieve its goal of near-universal health insurance coverage.

For example, of the roughly 350,000 people who were uninsured before the law’s enactment and now have coverage, about 85,000 are in employer-sponsored plans. That increase, observers say, is largely the result of employees opting for coverage to avoid a state penalty as high as $900. The penalty is imposed on people who are not enrolled in a health plan.

“Employers definitely are doing their part,” said Richard Lord, president and CEO of the Associated Industries of Massachusetts in Boston.

While employers are upset about the proposals, they will continue to support the health care reform law, some state observers say.

“Business understands that the law is a good thing for Massachusetts,” said Phil Edmundson, CEO of Boston-based William Gallagher Associates Insurance Brokers.

State officials attribute revenue shortfalls to underestimating the number of lower-income uninsured. As a result, more people than originally projected received state-subsidized coverage. For example, about 175,000 state residents currently receive coverage through Commonwealth Care, the state-subsidized program for the low-income uninsured. That compares with earlier projections of about 136,000 by September 30. Patrick’s proposed budget for fiscal 2009 anticipates enrollment hitting 225,000, and some state observers say the number could go even higher.

“If you offer a financial incentive for people to get coverage, don’t be surprised if they take you up on it,” Hewitt’s Piro said.

The price of reform

How Massachusetts employers would pay more under Patrick’s proposal:

• To avoid a $295 per-employee assessment, employers would have to enroll at least 25 percent of full-time employees in their health plans and pay at least 33 percent of premiums for individual coverage.

• If revenue from Fair Share assessments does not generate $38 million a year, the per-employee assessment would be increased.

• Fair Share assessments would be paid quarterly.

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

 

The growth in health care costs paid by employers is expected to level off in 2009 after five years of deceleration, a report from PricewaterhouseCoopers’ Health Research Institute predicts.

Based on a survey of more than 500 employer and health plans providing coverage to 11 million lives, New York-based PricewaterhouseCoopers found that medical costs will increase by 9.6 percent on average next year, compared with an average of 9.9 percent this year.

Improved medical management and a focus on prevention and wellness are among the tools that employers are using to slow down the growth in health care costs, according to the report, “Behind the Numbers: Medical Cost Trends for 2009,” which was released Thursday, July 24.

Two-thirds of employers contract with disease management programs that focus on reducing and eliminating hospitalization, the report found. In addition, two-thirds of employers have adopted wellness programs, nearly half of which say they are somewhat effective at reducing costs.

Generic substitution of prescription drugs also continues to reduce health care costs for employers, according to the PricewaterhouseCoopers report. However, this benefit is likely to diminish, since fewer brand-name drugs are going off patent in 2009, the researchers said.

Although the rate of increase in health care costs is being tempered somewhat, PricewaterhouseCoopers found that two major factors continue to contribute to employers’ growing medical tab: new construction in the health care industry and cost-shifting from the uninsured.

In particular, the health care industry is in an era of booming construction in response to increasing consumer demand, PricewaterhouseCoopers reported. Moreover, if there is a recession in 2009, the health care industry could grow even more. During previous recessionary periods, health care has increased its portion of the gross domestic product and medical prices have risen faster than other prices, PricewaterhouseCoopers said.

In addition, one of every four dollars spent by private payers is making up for decreasing government financing to Medicare and Medicaid, the report found.

A copy of the complete report can be found at www.pwc.com.

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

A suicide sufficiently connected to an industrial injury is compensable under Nevada’s workers’ compensation system, the state’s highest court has ruled.

State law barring family members from collecting workers’ comp benefits if a worker’s death resulted from a “willful intention to injure himself” does not apply when a “sufficient chain of causation is established,” the Nevada Supreme Court ruled in Sharon Vredenburg v. Sedgwick CMA and Flamingo Hilton-Laughlin.

To establish such a chain, claimants must demonstrate that the employee suffered an industrial injury that in turn caused a psychological injury severe enough to override rational judgment. Claimants must then establish that the psychological injury caused the employee to commit suicide, the court said.

The decision stems from a back injury that Danny Vredenburg, a bartender, suffered from slipping on a flight of stairs, causing disc derangement in several locations along his spine, court records show. Despite surgery and the use of pain medications and anti-inflammatory agents, he continued to experience pain.

A doctor diagnosed Vredenburg as psychologically destabilized because of his chronic pain and recommended that he claim permanent disability status. When Vredenburg killed himself, a second doctor opined that Vredenburg did so because of the unrelenting pain, and his spouse then filed for death benefits.

But the insurance administrator for Vredenburg’s employer ruled that the doctor’s opinion lacked a medical rationale linking the suicide to his industrial injury and denied the claim.

A workers’ comp appeals officer agreed, and a district court denied the claimant’s petition for judicial review. But the Nevada Supreme Court reversed and remanded the case for proceedings consistent with its opinion.

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

 

After 11 years, a bill that would increase penalties for pay discrimination against women could soon be on the floor of the House of Representatives.

On Thursday, July 24, the House Education and Labor Committee approved the Paycheck Fairness Act on a party-line vote, 26-17. The bill updates a mid-1960s law that prohibits wage disparities between men and women performing the same job.

The measure would put gender discrimination on par with racial discrimination in terms of remedies by allowing women to sue for punitive and compensatory damages.

“If we are serious about closing the gender pay gap, we must get serious about punishing those who would otherwise scoff at the weak sanctions under current law,” said Rep. George Miller, D-California and chairman of the committee. He cited Census Bureau statistics that show women make 77 cents for every dollar earned by a man.

Under the bill, a company that pays women at a different rate than men would have to prove that the practice is based on a business necessity.

The measure would permit workers to share pay information and prohibit employers from banning such discussions from the office. It also would establish Department of Labor grants for “negotiation skills training programs for girls and women.”

Republicans criticized the bill, saying it was unnecessary because the Equal Pay Act of 1963 already makes wage discrimination illegal. They asserted that the bill would increase litigation costs and undermine recruiting and hiring.

“What we’re really debating here today is whether it should be easier for trial lawyers to cash in under the Equal Pay Act, and whether it should be more difficult for employers to make legitimate employment decisions based on factors other than sex,” said Rep. Howard “Buck” McKeon, R-California and the ranking member of the labor committee.

Republicans kept the bill bottled up while they controlled the House. It was in the hopper for a decade before finally getting a hearing, which didn’t occur until Democrats captured the majority last year.

Now it could be speeding along. The bill’s author, Rep. Rosa DeLauro, D-Connecticut, said it could be placed on the House calendar for a vote as early as the week of July 28.

“This is the thrill of a lifetime,” she said in an interview after the labor committee action.

The full House will almost certainly approve the bill, which has 230 co-sponsors. But the Senate companion bill is unlikely to make it through the legislative process this year.

Nonetheless, a House vote would help Democrats politically. Battling pay disparity is an issue that the party believes is one of its strong suits, especially as the economy falters.

Polls show presumptive Democratic presidential nominee Sen. Barack Obama leading Republican rival Sen. John McCain by a substantial margin among women.

“There is a sense of economic insecurity for women,” DeLauro said. “It’s palpable nationwide.”

Before the final labor committee vote on the bill, Republicans offered an amendment that framed wage worries in a different way, linking them to rising gas prices. It would have directed the Bureau of Labor Statistics to conduct a study on “the increase in the price of gasoline to unprecedented levels … and the effect of such an increase on the income of women workers.”

That amendment and one that would allow employees to take compensatory time off in lieu of overtime pay were denied a vote because Democrats said they were not related to the underlying bill.

—Mark Schoeff Jr.