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Obama Puts Pen to Discrimination Bill in First Signing

It’s too early to tell whether Lilly Ledbetter will join the pantheon of historic civil rights figures. But at a ceremony in the East Room of the White House on Thursday, January 29, she became the symbol of how President Barack Obama intends to put employees at the center of workplace policy.


The first piece of legislation that Obama signed into law was a bill named after Ledbetter that would make it easier for workers to sue for pay discrimination.


Obama called the bill “a simple fix to ensure fundamental fairness for American workers.” He said that women are “losing thousands of dollars in salary income and retirement savings” because of pay inequities.


“In this economy, when so many folks are already working harder for less and struggling to get by, the last thing they can afford is losing part of each month’s paycheck to simple and plain discrimination,” Obama said.


Ledbetter, a former supervisor at a Goodyear Tire & Rubber plant in Alabama, entered the ornate hall alongside Obama to applause from a large audience that included more than two dozen bipartisan members of Congress.


Under the Lilly Ledbetter Fair Pay Act, the statute of limitations would run 180 days from each paycheck that is diminished by discrimination. Two years ago, in a case involving Ledbetter, the Supreme Court ruled that a plaintiff must file a suit within 180 days of the original discriminatory act.


Now each pay stub will be considered a separate violation. Workers could collect two years of back pay from the time a suit was filed.


Opponents say the new law eviscerates the statute of limitations, potentially subjecting businesses to costly lawsuits over decades-old compensation decisions involving people who may no longer work at the company. In addition, pensions based on unfair pay may come into question.


“These are the kind of disputes you have to solve quite promptly, otherwise the employer’s ability to defend will dissipate very quickly,” said Neal Mollen, a partner with Paul Hastings in Washington.


Supporters say the bill reverses a controversial 5-4 Supreme Court decision in 2007. Ledbetter alleged that she was paid less than male counterparts for 20 years. She said she didn’t realize the pay discrepancy existed until a colleague placed an anonymous note in her mailbox many years later. She filed her claim in 1998.


Stuart Ishimaru, the chairman of the Equal Employment Opportunity Commission, said the Ledbetter bill simply reinstates the statute of limitations in pay disputes that had been in place before the Supreme Court ruling. The agency receives 5,000 wage dispute filings annually. Ishimaru was appointed chairman by Obama.


“The [Ledbetter law] is a victory for working women and all workers across the country who are shortchanged by receiving unequal pay for performing equal work,” Ishimaru said in a statement. “The EEOC intends to enhance enforcement in this area, in addition to increasing public outreach and education.”


The House passed the Ledbetter bill in 2007, but it was killed by a Senate filibuster in 2008. This year, a larger Democratic majority ensured Senate approval on January 22. The House originally passed the Ledbetter bill on January 9 and had to approve it again January 27 for procedural reasons.


For Obama, the Alabama grandmother is a touchstone for equality. She campaigned with Obama last fall at events designed to highlight women’s issues.


“There are no second-class citizens in our workplaces,” Obama said. “Ultimately, equal pay isn’t just an economic issue for millions of Americans … it’s a question of who we are—and whether we’re truly living up to our ideals.”


But experts say the law could sharply increase litigation and compliance costs for companies. In the latter area, a premium will be placed on keeping track of pay decision details.


“In an ideal world, an employer would figure out how to keep those records forever,” said Andy Tanick, a partner at Ford & Harrison in Minneapolis. “In the real world, they’ll have to do the best they can to keep records as long as they reasonably can.”


In criticizing the law, one employment lawyer says that it could reassure HR departments that they will be in demand even in a declining economy.


“This will put an enormous burden on HR professionals,” said Mollen. Executives are “going to look to HR managers to reconstruct why employee A got [a] 4 percent [raise] and employee B got 3 percent.”


Those calculations won’t apply to Ledbetter, who will not be able to recover back pay or damages from Goodyear. But she will be immortalized by the eponymous legislation.


And she can take back to Alabama one of several pens Obama used to make it a law.


“To watch him sign a bill that bears my name, a bill that will help women and others fight pay discrimination in the workplace is truly overwhelming,” Ledbetter said at a White House reception, according to a press pool report.


—Mark Schoeff Jr.


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House Passes Stimulus Bill With COBRA Subsidy

A federal subsidy to help laid-off workers extend their employer health care passed the House on Wednesday, January 28, as part of the $819 billion economic stimulus bill. One item, however, has employers in an uproar.


That is a provision making employers responsible for extending health coverage permanently to former employees 55 or older or those who worked for the company for at least 10 years.


And unlike the measure to make it cheaper for workers to extend employer health care under the federal law known as COBRA, this provision would be permanent.


Lobbyists for employers are leading an intensifying campaign to remove the measure, which does not exist in the bill before the Senate, from any bill that eventually goes to President Barack Obama for signing.


“We recognize people are hurting and that people are laid off, but we don’t like the idea of continuing COBRA coverage to provide health care coverage to everyone,” said Mark Ugoretz, president of the ERISA Industry Committee.


Obama is hoping to sign the economic stimulus bill by Presidents Day, February 16.


With support in both chambers, it is likely that Congress will pass the provision for the federal government to pay 65 percent of the total cost of a laid-off worker’s health care premium. The law would apply to workers involuntarily terminated between September 1, 2008, and December 31, 2009.


That means employers could have as little as two weeks to make the necessary administrative changes to be able to comply with the law by the time health care coverage decisions take effect, as they normally do, at the beginning of each month.


The mechanics of complying with the law appear to be straightforward: An involuntarily terminated employee who chooses to extend coverage would pay 35 percent of the total cost of his or her health insurance; the employer would cover the rest. Employers would then deduct that amount from the payroll taxes the company wires to the Internal Revenue Service the following pay period.


“The good news is that companies immediately get their money back,” said Susan Relland, an attorney with Miller & Chevalier in Washington.


But she said employers “need to be paying attention now and start thinking about this now.”


Relland said employers could have 60 days to send a notice to eligible former employees of their option to extend their health insurance at a subsidized rate. Laid-off workers would then have 60 days to decide.


The provision that has angered employers calls for businesses to extend COBRA coverage to any employee who has been with a company at least 10 years or who is 55 or older. Those former employees would have access to an employer plan until they are eligible for Medicare at 65.


Employers would not have to pay for any part of the premium, but they worry that such a law would appeal only to former employees who have serious health concerns—and often high health care costs—that make it prohibitively expensive to find coverage on the individual market.


“You are basically building an engine for greater employee health costs,” Ugoretz said.


Supporters of the measure, introduced by Rep. Pete Stark, D-California, argued that it is a bridge to Medicare meant to help older workers, especially low-skilled workers in manufacturing, who may have a hard time quickly finding another job with health benefits.


Employer groups sent a letter of protest to congressional members last week. Those who signed the letter included the Corporate Health Care Coalition, ERISA Industry Committee, HR Policy Association, National Association of Manufacturers, National Association of Wholesaler-Distributors, National Retail Federation and U.S. Chamber of Commerce.


The Senate is expected to vote on the economic stimulus bill next week.


—Jeremy Smerd


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Employers Struggle to Comply With Diverse Leave Requirements

Whether President Barack Obama will expand the Family and Medical Leave Act as promised during his race for the White House could depend on the nation’s economic health, consultants say.


But even without another expansion of the FMLA, employers already are struggling to track employee leave under a growing number of state and city time-off mandates, some of them requiring time off with pay, which federal law has yet to require.


The growing pressure on employers to comply with various leave laws—including recent FMLA changes—comes as the faltering economy could slow a trend of companies outsourcing the tracking of absences and their compliance with the expanding leave mandates, says Marcia Carruthers, CEO of the San Diego-based Disability Management Employer Coalition.


“It’s definitely going to be harder on [employers] to stay in compliance,” Carruthers says. “We may see a slight shift [away from a trend for employers to outsource] because they are not going to have the funds to do that. So they are going to have to try to figure it out for themselves.”


Recent time-off mandates include one that voters in Milwaukee approved in November for a February 10 implementation. The Metropolitan Milwaukee Association of Commerce has mounted a legal challenge, but the referendum would require private-sector employers in Milwaukee to allow workers to accrue up to 72 hours of paid sick leave.


Businesses with fewer than 10 employees would have to provide fewer hours, up to 40 hours of sick leave.


The leave could be used for an employee’s medical care or family care or to seek help for domestic abuse or sexual assaults. San Francisco and Washington have adopted similar laws, observers say.


The expanding number of leave laws is making it more complex for employers to remain compliant, says Tom Klett, senior consultant at Watson Wyatt Worldwide in Stamford, Connecticut. Employers are increasingly concerned that additional mandates, in addition to the paid time off that companies traditionally provide their workers, will harm business operations and productivity, Klett says.


The time that employees spend away from work because of workers’ compensation or disability claims, as well as issues such as bereavement leave, adds to the complexity of tracking and complying with the expanding leave laws, says Joanne Archer, manager of leave services in Dover, New Hampshire, for Liberty Mutual Group Inc.


“The complexity comes from the employer having to track the amount of time an employee has available both under federal, and now state, leave benefits,” Archer says.


States—such as Vermont last year—also have adopted laws requiring time off for crime victims and to allow parents to attend functions at their children’s schools, says Bryon Bass, absence-management practice lead for Sedgwick Claims Management Services Inc. in Albuquerque, New Mexico.


“We are seeing such a prevalence in the number of new laws that are either being put on the docket or being enacted that we have had to resort to providing a monthly bulletin to our clients of these changes and changing our administrative [tracking] procedures,” Bass says.


At the same time, the FMLA recently has grown more complex with new regulations, Carruthers and others say.


A year ago, then-President George W. Bush signed legislation expanding the FMLA to allow employees up to 12 weeks of unpaid leave when a spouse, child or parent is on active military duty. It also allows 26 weeks of FMLA leave to care for a service member injured on duty.


The changes took effect January 16, and mark the first expansion of the FMLA since 1993, when the law first was adopted.


Among other requirements, the new federal regulations also call for employers to inform employees about the amount of remaining leave time available to them under the FMLA within five business days of a request, Archer says. Periodic notification of remaining leave days also is required.


Additional FMLA expansion may be on the way, several observers say. They cite Obama’s campaign pledges to help workers balance work and family.


That could include allowing employees to take time off for elder care, a child’s school activities or caring for any individual residing in their home for six months, according to the Obama/Biden Web site.


But efforts to boost the economy could hamper those efforts, consultants agree.


Employees, meanwhile, are likely to weigh the scarcity of jobs in the economy when deciding whether to exercise leave rights, the consultants point out.


Some will take less time out of fear for their jobs, says Carol Tavella, senior manager of compensation and benefits at SMART Business Advisory & Consulting in Devon, Pennsylvania. Others will take more time off for mental health purposes because of the “stress component of the economy,” she says.


During the nation’s last economic contraction, employers saw a net increase in absences, Bass says. That happened because enough employees, fearing they might eventually lose their jobs and the accompanying medical benefits, underwent surgeries and other medical care they previously had postponed.


To ensure that employers remain in compliance with the growing number of leave scenarios, it is best to centralize the effort under one person or one group, Tavella says.


Over time, more large employers have hired consultants to track the leaves for them. But, as Carruthers and others point out, that practice also could become a casualty of the economy.

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Disabled, Ill Kids Pose Workplace Challenges

The population of special-needs children is rising, but few U.S. employers realize how that group affects the workplace, experts say.

According to the Boston-based Center for Child and Adolescent Health Care Policy, an estimated 8.6 percent of U.S. workers care for a child younger than 18 with physical or mental disabilities or chronic conditions. That has tripled since 1960, the organization says.

Further, nearly 24 percent of such families said the condition caused family members to reduce their work hours or stop working, the U.S. Department of Health and Human Services says.

Eileen Brennan, associate dean of social work at Portland State University in Oregon and co-principal investigator of the Work-Life Integration Project at the university’s Research and Training Center on Family Support and Children’s Mental Health, says more employers need to be aware of the prevalence and strain of being a working parent with a special-needs child.

“It affects so many people in this country,” Brennan says. “As doctors are able to save more children [born prematurely], and children with special needs are not institutionalized as much and are living in communities, many more employers really need to be aware of this.”

Parents of such children experience a host of workplace quandaries. The Sloan Work and Family Research Network in Boston estimates that nearly 14 percent of parents need more than 10 hours a week to coordinate their child’s care, and 25 percent have been fired at least once due to their child’s exceptional care needs.

“Depending on the level of care that’s needed by the child, it can be a pretty demanding, unpredictable stressor for these employees,” says Judi Casey, principal investigator and director at Sloan.

Experts say a lack of communication between employers and employees often hinders progress on these issues. Companies are concerned about their employees’ privacy, says Janice Dragotta, a senior consultant for health and productivity at Watson Wyatt Worldwide in San Francisco. Employees are worried they will face scrutiny if they openly discuss their child’s condition, Casey says.

Dragotta says employers need to facilitate an environment in which all employees believe they can be open about their personal circumstances. Allowing flexible work schedules and sick leave policies are ways to support a wide range of employees, including those with special-needs children.

Flexibility essential

Ophelia Galindo, national leader of the absence and productivity solutions group at Buck Consultants in Los Angeles, says flexibility is what parents of such children need most.


“Flexibility is the key word,” Galindo says. “With a special-needs child, there is some unpredictability around their needs.”

She says employee assistance programs are companies’ most common form of support, but some companies go beyond EAPs and offer specific programs.

New York-based professional services firm Ernst & Young established a network for such employees. Services include telephone conferences on general and condition-specific topics such as Down syndrome and autism, as well as consultation and support around estate planning, internal and external benefits as well as resources. It also sponsors parent mentoring, whereby experienced families mentor parents with newborns or children just diagnosed with special needs.

Newark, New Jersey-based Prudential Financial Inc. also offers a support network for its employees with special-needs children. The group goes beyond educating those directly affected by such circumstances. It informs the entire organization about this population’s challenges, helping colleagues to understand and empathize rather than judge a co-worker for frequent absences or need for more flexible schedules.

Additionally, Prudential’s employee assistance and work/life programs offer emergency backup child care, referrals to services such as summer camps geared for special-needs children and a limited number of free counseling sessions. Maureen Corcoran, Prudential’s vice president of diversity, says offering such programming helps the company keep its most valuable employees.

“Employees tell us they stay because they are supported,” Corcoran says. “I’ve had people tell me often that they know that if they left the firm, they wouldn’t get the flexibility or understanding around their particular life situations.”

The Canada Post Corp. in Ottawa supports its employees with special-needs children who also are members of the Canadian Union of Postal Workers and the Union of Postal Communications Employees by funding two programs developed and delivered by the former.

The first program offers direct support from special-needs advisors; $100 each month for each member with a special-needs child to offset extraordinary costs such as respite child care, transportation and uninsured health expenses; information and resources, including a newsletter; and a Web site to connect with other parents.

The second program supports union members who have disabled children transitioning from youth services provided before age 19 to adult services. It provides information, resources and financial support similar to those in the first project.

Jamie Kass, national child care coordinator for the Canadian Union of Postal Workers, says the programs help with employee retention and productivity.

“All of those kinds of things help to make workers more effective at work,” Kass says. “I think it’s made a big difference in terms of people’s morale and how they feel in the workplace.”

Watson Wyatt’s Dragotta says employers and employees benefit from such supportive work environments.

“If an employer is able to offer some supports, it really becomes a win-win, because the employee has that fabric of support and resources they need, which I think, in turn, translates into the employee being able to be at work and focus on work,” she says.

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TOOL Health Observances for February

It’s appropriate that in February we would observe American Heart Month, with the Wellness Council of America reminding employers to make sure that employees “are heart smart and heart healthy.” But the nonprofit council, which aims to help improve the health of working Americans, points out that employers can make employees aware of other conditions and issues as well. For instance, National Donor Day occurs this month, and it’s also National Wise Health Consumer Month and National Cancer Prevention Month. Employers can see the entire list at http://www.welcoa.org/observances/february.php, which includes resources, Web sites and contact information for such organizations as the American Heart Association and the M.D. Anderson Cancer Center.

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UAW Agrees to Drop Jobs Bank at General Motors

The United Auto Workers has agreed to let General Motors terminate its Jobs Bank, providing the automaker with the same bailout concession made to Chrysler last week, GM confirmed Wednesday, January 28.


Starting Monday, February 2, the 1,600 GM workers now in the Jobs Bank must go on state unemployment and GM-funded supplemental benefits, said GM spokesman Tony Sapienza.


The combined unemployment and supplemental pay represents about 72 percent of standard weekly wages. The Jobs Bank represents nearly 100 percent.


The government made elimination of the Jobs Bank a condition for about $17.4 billion in rescue loans approved for GM and Chrysler last month.


The money-saving changes had to be negotiated with the UAW. Last week, the union let Chrysler shift its Jobs Bank workers onto unemployment and supplemental pay.


GM and Chrysler must show labor and debt restructuring by February 17, when the government will begin a review of their viability.


Ford executives say they also are interested in getting the same labor savings from the UAW as GM and Chrysler. Ford spokeswoman Marcey Evans would not comment on specific discussions with the UAW.


Sapienza said GM is also discussing supplemental pay with the union as part of current negotiations. Sen. Bob Corker, R-Tennessee, criticized the provision repeatedly when the automakers faced Congress for the loans late last year.


Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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House Approves Pay Discrimination Bill Again, Sends to Obama

President Barack Obama will soon be able to fulfill a campaign promise by signing a pay discrimination bill into law that was passed by the House on Tuesday, January 27, in a 250-177 vote.


The measure, known as the Lilly Ledbetter Fair Pay Act, would make it easier for workers to sue for pay inequities.


The House acted on a bill the Senate approved January 22. The House originally passed the measure as part of a larger pay discrimination package January 9. But the Senate acted only on the Ledbetter portion, which necessitated another House vote.


Obama and first lady Michelle Obama made the Ledbetter bill a centerpiece of campaign events designed to highlight women’s issues.


Under the legislation, each paycheck that has been diminished by discrimination is a separate violation of civil rights law. The statute of limitations for filing a suit would run 180 days from each paycheck. A worker could recover two years of back pay.


Opponents argue that the bill eviscerates the statute of limitations, potentially subjecting businesses to lawsuits over pay decisions that date back decades at a time when they are trying to cope with the recession. 


Supporters say that the bill overturns a 2007 Supreme Court decision. Ledbetter, a former supervisor at a Goodyear Tire & Rubber plant in Alabama, sued the company for paying her less than her male counterparts for 20 years.


The court held, 5-4, that Ledbetter should have filed her claim within 180 days of the initial discriminatory decision rather than nearly two decades later. She said she didn’t realize the pay discrepancy existed until a colleague placed an anonymous note in her mailbox many years later.


Justice Ruth Bader Ginsburg, in a strong dissent, asserted that the court majority did not understand workplace realities, such as silence about pay levels. She urged Congress to overturn the ruling.


The Ledbetter bill was originally introduced in 2007 and approved by the House that year. It was blocked by a Senate filibuster in 2008.


But after the election, Senate Democrats increased their majority from 51 to 58, with one seat still undecided. That margin allowed them to easily move the bill.


Tuesday’s House vote fell mostly along partisan lines. Democrats touted the Ledbetter bill as way to bolster the concept of equal pay for equal work.


“It’s fundamental to the values of our country,” said Rep. George Miller, D-California and chairman of the House Education and Labor Committee. “It’s basic to our economy. In far too many workplaces, that is not what’s done.”


His counterpart, Rep. Howard “Buck” McKeon, R-California and ranking member of the labor committee, criticized Democrats for sending the Ledbetter bill straight to the House floor rather than putting it through the committee process.


McKeon said that the GOP did not have a chance to make changes to the bill. No amendments were allowed during the floor debate.


“This is a major fundamental change of civil rights law affecting … four statues,” McKeon said. “There has not been a full and fair debate.”


Miller dismissed Republicans as apologists for businesses that are trying to cut corners through unfair compensation. He said Ledbetter critics believe that “somehow women should underwrite these tough economic times” by suffering pay discrimination.


The Ledbetter measure was one of two bills included in the original House legislation. The other was the Paycheck Fairness Act, which would allow unlimited punitive and compensatory damages in wage suits and force businesses to prove that pay differences are based on factors other than sex.


The Senate has put off consideration of the paycheck bill, which was written by Rep. Rosa DeLauro, D-Connecticut. She said that the effort to address unfair pay would continue.


“That process starts in earnest with the Lilly Ledbetter Fair Pay Act,” DeLauro said. “I urge the Senate to build on this foundation.”


—Mark Schoeff Jr.


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GM Trims 2,000 More Jobs, Reduces Production Further as Sales Fall

General Motors will cut about 2,000 jobs at two plants and plans periodic shutdowns at about half of its 16 U.S. factories as consumers continue to shun new vehicles.


The automaker will eliminate one shift at the end of the quarter at its Lordstown, Ohio, plant and its factory in Delta Township, Michigan. In addition, nine of GM’s other U.S. plants and its Oshawa car factory in Ontario will be idled for “some number” of weeks through midyear, GM spokesman Chris Lee said Monday, January 26.


The cutbacks mark GM’s latest attempt to shrink bulging inventories while preparing a viability plan for the U.S. government next month to safeguard $9.4 billion in federal loans. The automaker began phasing out two other shifts in November, slowed production by a combined 56 percent at two other plants and halted work at nearly all its North American plants after the holiday shutdown.


“We’re just aligning production with market demand,” Lee said. “Nobody was able to buy any cars,” he said, referring to the credit crunch that has deepened the U.S. recession while dragging vehicle sales to 26-year lows.


Forecast lowered again
This month, GM lowered its 2009 industry sales forecast to 10.5 million vehicles from a projection as high as 12 million in December.


The Lordstown plant ramped up from two shifts to three last summer as soaring gasoline prices boosted sales of small cars. But in November, GM said it would return the plant to two shifts February 2.


The changes announced Monday will drop Lordstown to one shift April 6, with the first and second shifts working alternate weeks starting February 9. The plant, where workers make the compact Chevrolet Cobalt and Pontiac G5, will lose about 800 jobs.


The Delta Township plant, which produces the Buick Enclave, GMC Acadia and Saturn Outlook crossovers, will lose about 1,200 workers. Its two shifts will alternate starting February 2, with the reduction to a single shift taking effect March 30.


GM began 2009 with a 102-day supply of new vehicles, down from a 139-day stock December 1. GM’s figure is higher than the January 1 industry average of 94 vehicles, which in turn is 50 percent above the level considered normal.
All of the North American factories will resume production at some point this quarter, Lee said.


‘Devastating’
The Lordstown cuts are “devastating” to an area that has lost 2,000 jobs as a result of GM’s last cuts, said Jim Graham, president of UAW Local 1112. But automakers can’t control having to make recent cuts, he said.


“The economy’s in the tank,” Graham said. “People are afraid to buy big-ticket items like cars, and we’re hopeful by midsummer things will start opening up, now that there’s a new administration in place.”


The Lordstown plant still has a “bright” future because in 2010 it will start making the Chevrolet Cruze, which Graham said he hopes can achieve more than 40 mpg.


Along with eliminating the Lordstown factory’s third shift, GM’s latest production cuts mean its sedan plant in Orion Township, Michigan, also loses a shift February 2. The truck plant in Pontiac, Michigan, and sedan plant in Hamtramck, Michigan, also begin producing 44 and 68 percent fewer vehicles per hour, respectively.


GM sold 3 million vehicles in the U.S. last year, down from 3.8 million in 2007. The industrywide total last year was 13.2 million.

Filed by Chrissie Thompson of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com


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Rules Freeze Affects Risk Management, Benefits

A vast array of proposed rules and regulations that have not been officially adopted or have been recently adopted but not implemented, are now subject to White House review before further action.


A memo issued to federal agencies immediately after President Barack Obama occupied the White House on January 20 freezes implementation of all pending and recently issued regulations, some with risk management and employee benefit implications.


A vast array of proposed rules and regulations that have not been officially adopted or have been recently adopted but not implemented, are now subject to White House review before further action.


For example, the memo signed by Obama’s chief of staff, Rahm Emanuel, halts implementation of a proposed rule mandating how the U.S. Occupational Safety and Health Administration and the U.S. Mine Safety and Health Administration conduct risk assessments of toxic substances and hazardous chemicals in the workplace.


Democrats and labor charge the rule would weaken worksite regulation, and they say President George W. Bush’s administration hurried to implement it before he vacated the White House.


The U.S. Chamber of Commerce supports the measure, which was posted in the August 29 Federal Register. The chamber argues it would improve safety by standardizing analysis of risks posed by chemicals and toxins.
 
Another proposed regulation that could be affected would require that contracts between employee benefit plans and plan service providers disclose any conflict of interests the service providers may have and the reasonableness of their fees. It appeared in the December 13, 2007, Federal Register, but a final rule was never implemented.


An interim Coast Guard rule that would have been effective March 17 could also be affected. It seeks to prevent pollution from ships by amending regulations for equipment used to reduce oil discharges. It was posted in the January 16, 2009, Federal Register.

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


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Pension Tension PBGC Stays on Government Watch List

The Pension Benefit Guaranty Corp will remain on the GAO’s “high-risk” watch list for 2009, amid concerns that the nation’s economic crisis could lead to more pension plan terminations that would increase the agency’s budget deficit, according to a Government Accountability Office report.


The PGBC’s deficit declined to $11.2 billion as of September 30, from $14.1 billion at the end of the previous fiscal year, the GAO said in the report, “High-Risk Series, an Update.” But it also said the financial crisis had probably eroded the funding of many large plans and lowered the credit rating of many plan sponsors, “developments that the most recent (PBGC) estimates may not reflect.”


The PBGC has been on the GAO’s watch list since July 2003.
Last year, the PBGC increased its equity and alternative-investment exposure, moving away from fixed income.


“PBGC believes this change will help it meet its long-term financial obligations, but it also increases the risk of large investment losses,” the GAO said in its report. “Further, the long-term decline of the DB system continues to erode PBGC’s premium base, with PBGC insuring about 65% fewer plans than it did 15 years ago,” GAO said.


The report noted that recent legislation had relieved the pension funding obligations of some plan sponsors.


“In addition, the financial fate of the Detroit automakers, which sponsor very large DB plans, is also uncertain,” the GAO said. “These developments likely increase PBGC’s risk exposure, perhaps significantly” should the companies fail leaving greatly underfunded plans.


Giving the PBGC the legal authority to charge risk-based premiums could improve the agency’s financial standing, Jeffrey Speicher, a PBGC spokesman, said in a statement. The PBGC has authority to charge only a flat-rate premium based on the number of participants in a plan and to assess additional premiums on underfunded plans.


“Basing premiums on actual risk of failure is an idea that has long been on the table, and one that may continue to draw interest when future reforms are considered,” Speicher said in the statement.


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


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