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State Street Corp.’s $1.3 billion Salary Savings Program 401(k) plan is being examined by two law firms for possible ERISA violations, confirmed Warren Pyle and Ellen Doyle, officials at the law firms.

The firms—Pyle Rome Lichten Ehrenberg & Liss-Riordan and Stember Feinstein Doyle & Payne—are looking into whether plan fiduciaries knew or should have known their statements about the company’s financial health were incorrect. The firms said the statements could have contributed to Boston-based State Street shares being overvalued.

State Street on Tuesday, January 20, said it had an unrealized loss as of December 31 of $9.1 billion, an increase of nearly $5 billion in the fourth quarter, causing the company’s stock price to plunge to $14.43 from $19.89 that day. Doyle, an attorney at Stember Feinstein, said the resulting drop in stock price prompted losses in State Street’s employee stock option plan, which as of December 2007 held $400 million in State Street stock.

“We are investigating the claims right now and are in discussions with employees at the company about the problems,” Doyle said.

State Street spokeswoman Arlene Roberts was not immediately available for comment.

Filed by John D’Antona Jr. of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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Economic stimulus legislation to be considered by the Senate Finance Committee next week would provide temporary federal COBRA health insurance premium subsidies to employees who are laid off.

Under the measure, the federal government would pay 65 percent of COBRA premiums for employees who lose their jobs between September 1, 2008, through December 31, 2009. The subsidy would be available for up to nine months.

The provision is far more limited than the COBRA section of the economic stimulus bill approved Thursday, January 22, by the House Ways and Means Committee. Under that measure, beneficiaries 55 and older and employees who have worked at least 10 years for an employer could retain COBRA coverage until eligible for Medicare. That would be a huge change from current law that allows COBRA coverage for 18 months.

In addition, the Ways and Means Committee bill, which is expected to be considered by the full House next week, would provide a 12-month federal COBRA premium subsidy for those losing their jobs between September 1, 2008, and December 31, 2009.

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

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Employers would have to extend COBRA health care continuation coverage for older employees and longer-service employees until they are eligible for Medicare under legislation approved Thursday, January 22, by a House panel.

The COBRA provisions, tucked into the $825 billion economic stimulus package approved by the Ways and Means Committee, would be a huge expansion of the 1986 law that now gives employees who terminate employment the right to continue health insurance coverage from their former employers for 18 months by paying a premium equal to 102 percent of the cost of coverage provided to employees.

Under the measure, employees who stop working as young as age 55 could keep COBRA coverage until they were eligible for Medicare at age 65, regardless of the amount of time they worked for the employer. And any employee who worked for an employer for at least 10 years also could keep COBRA until eligible for Medicare.

In addition, the legislation, which was approved on a partisan 24-13 vote, would provide employees who are laid off between September 30, 2008, and December 31, 2009, a 65 percent federal COBRA premium subsidy for 12 months.

Committee member Ginny Brown-Waite, R-Florida, spoke in opposition to the expansion, warning that the claims costs of older beneficiaries could be close to double the premium they pay their former employers, adding thousands of dollars in health care costs per beneficiary to employers.

That could lead more employers to drop health insurance coverage, she said.

Business groups said such an expansion of COBRA would change the nature of the program. “The purpose of the COBRA program is not, and should not be, to provide long-term or permanent coverage,” Mark Ugoretz, president of the ERISA Industry Committee, wrote in a letter sent to federal legislators before the panel vote.

The full House is expected to take up the stimulus bill next week.

(For more, read “Obama Asks Workers and Businesses to Serve and Sacrifice.”)

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

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New York lost 49,100 jobs in 2008, as the deepening recession sparked the sharpest one-year employment downturn since 2003, the New York State Department of Labor said in a report Thursday, January 22.

The city’s December unemployment rate shot up to 7.4 percent, from 6.3 percent in November, hitting the highest level in nearly five years and climbing above the national rate of 7.2 percent. Statewide, the unemployment rate jumped to 7 percent, from 6 percent, the steepest one-month climb on record.

“It’s one of those months when the numbers speak clearly for themselves,” said James Brown, principal economist for the New York State Department of Labor.

The annual losses include 27,900 jobs that evaporated in December alone, according to an analysis of Labor Department data by real estate firm Eastern Consolidated.

The severe deterioration in the job market left private-sector employment in the city 1.5 percent below 2007 levels. Not only has the pace of layoffs picked up, but the city witnessed dismal holiday season hiring, which typically bolsters December job levels, Brown said.

Weakness spread across just about every industry, with Wall Street, not surprisingly, leading the way. The city shed 17,500 securities jobs last year, or more than 9 percent of its December 2007 total. Professional and business services lost 8,900 positions. Construction was also a big loser, with 7,000 jobs disappearing.

For December, losses were highest in the retail sector, which shed 3,700 jobs, the Eastern Consolidated report said.

“New York lagged the nation in entering the recession, but it’s clear we are not lagging any longer,” said James Parrott, chief economist at the Fiscal Policy Institute, a liberal research group.

The rising job loss caused more New Yorkers to file unemployment claims and led to calls by advocacy groups to reform the state’s unemployment insurance system.

Statewide, the number of initial claims rose 16 percent in 2008 compared with a year ago, reaching 1,239,627. The 173,381 claims in December were up 51 percent over November. More New Yorkers are unemployed than at any time since October 1993.

The pace of new claims has outstripped the state Unemployment Insurance Trust Fund’s ability to keep up, forcing it to borrow from the federal government to survive.

New York State AFL-CIO president Denis Hughes released a statement Thursday calling for the Legislature to increase unemployment benefits for workers. The Fiscal Policy Institute and National Employment Law Project issued a similar call.

A spokesman for the Business Council of New York State said reforming the unemployment insurance system—which is funded by payroll taxes—is a complex project that requires debate. “It’s simply not as simple as saying raise the benefit,” he said. “Currently, New York State employers struggle in a high tax climate overall.”

The surge in unemployment triggered a 13-month extension in federally funded unemployment benefits, and the proposed federal stimulus could increase benefits by $25 a month, but the advocates say those measures aren’t enough.

The maximum weekly unemployment benefit in the state has been frozen at $405 per week since 2000 and would need to rise to $577 to keep pace with wage increases since that time. New York’s unemployment benefit replaces just 26.6 percent of the average worker’s paycheck—lower than every state except Alaska, Parrott said. The unemployed can qualify for $560 per week in New Jersey and $519 per week in Connecticut.

“The unfortunate failure to adjust New York’s maximum weekly unemployment benefit to keep pace with the growth in average wages is costing New York’s businesses hundreds of millions of dollars in consumer purchases, and ultimately worsening the state’s already bleak job picture,” Parrott said.

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

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The Senate approved a measure Thursday, January 22, that would make it easier for workers to sue for pay discrimination. It will now likely be among the first that President Barack Obama signs into law.

The Lilly Ledbetter Fair Pay Act, which passed 61-36, would restart the statute of limitations for filing a lawsuit each time an employee receives a paycheck that has been diminished by discrimination. It was part of a larger pay discrimination package that the House approved January 9.

The Senate decided to act just on the Ledbetter bill, which means it now must go back to the House, where quick approval is expected. Obama and first lady Michelle Obama made the Ledbetter bill a centerpiece of campaign events designed to highlight women’s issues.

Ledbetter was the plaintiff in a controversial 2007 Supreme Court case and has become an icon for the fair-pay movement. She appeared Thursday at a Capitol Hill press conference and traveled with President Obama and Vice President Joseph Biden on their train trip to Washington before the inauguration Tuesday.

“We have now overwhelmingly passed a bipartisan bill to correct an injustice among women and minorities that has prevailed in the pay discrimination area,” said Sen. Barbara Mikulski, D-Maryland, who led the floor debate for her party. “Today, we changed the law; we changed direction; we changed history.”

Corporate advocates opposed the bill, contending that it undermines the statute of limitations in civil rights law and would foster costly lawsuits at a time when businesses are coping with the recession.

The HR Policy Association criticized the Senate process for considering the legislation, which went straight to the floor without committee hearings or votes.

The Ledbetter bill was originally introduced in the previous Congress. It was approved by the House in 2007 but was blocked by a Senate filibuster in 2008.

“We had hoped that the pronouncements of the new administration about seeking bipartisan consensus solutions would carry over into the human resources policy field,” Daniel Yager, chief policy officer and general counsel for the association, said in a statement. “This steamrolling of the bill is more akin to the old-school style of one group pushing through legislation without trying first to resolve differences among the various stakeholders.”

This week, Senate Republicans offered several amendments that would narrow the scope of the lawsuit filing deadline, limit suits just to those involving pay, and clarify that only an employee, rather than anyone “affected by” pay discrimination, could sue. They were all defeated.

Proponents say the measure would overturn a 2007 Supreme Court decision that resulted in workplace injustice.

“It keeps open the courtroom doors to women, minorities and people with disabilities,” Mikulski said.

Critics counter that the bill would eviscerate the statute of limitations and subject businesses to suits involving people who no longer work at the company or may even have died.

“It’s terrible public policy to say that you can be sued [for] something that happened 30 years ago,” said Larry Lorber, a partner at the law firm Proskauer Rose in Washington.

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 Supreme 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.

November’s elections put Senate Democrats in a much stronger position to push Ledbetter’s cause. The party’s majority increased to at least 58, with a Minnesota seat still in dispute. Last week, the Senate easily overcame a filibuster when Democrats agreed to consider amendments.

One of them, offered by Sen. Kay Bailey Hutchison, R-Texas, would have started the clock on the statute of limitations when a plaintiff “knows or should have known” about pay discrimination. The proposal had the backing of business groups.

The amendment was defeated, 55-40. Democrats asserted that the language would place an unreasonable burden on plaintiffs.

Holly Eng, a partner in the labor and employment group at Dorsey & Whitney in Minneapolis, said the Hutchinson amendment would have made the Ledbetter bill more palatable.

“It gives [an employee] a little more flexibility, but it also gives employers reassurance that we may not have to defend completely stale claims,” Eng said.

Hutchison said she was trying to provide balance to the Ledbetter bill. Mikulski, however, said that the Supreme Court ruling ignored workplace realities and tipped the scales toward companies.

“Their decision was biased and protects corporate interests over human interests,” Mikulski said.

With the Ledbetter bill certain to become law, HR professionals need to be prepared to address pay questions.

“If an employee complains about a prior action, you have to pay attention and you have to do your homework,” Eng said.

It also might be necessary to keep copious records of compensation decisions indefinitely.

“The frontline burden in pay is going to fall on HR people,” Lorber said.

But Mikulski asserted that life does not have to become more difficult for companies.

“The best way to avoid a lawsuit is, don’t discriminate,” she said.

—Mark Schoeff Jr.

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The number of U.S. initial jobless claims climbed higher the week ended January 17, while the four-week moving average was unchanged, according to numbers released Thursday, January 22, by the U.S. Department of Labor.

Initial unemployment claims increased 11.8 percent to 589,000 in the week ended January 17, compared with the revised number of 527,000 from the previous week, according to the Department of Labor. The four-week moving average of initial claims was unchanged from the previous week at 519,250, based on a revised average.

Initial claims represent those people filing for unemployment benefits.

The weekly median wage for full-time U.S. workers was $728 in the fourth quarter of 2008, up 4 percent from the fourth quarter of 2007, the U.S. Bureau of Labor Statistics reported today.

Full-time workers older than 25 without a high school diploma had a weekly median wage of $459, compared with $619 for high school graduates without college. Those with at least a bachelor’s degree earned a median wage of $1,115 a week.

Women who usually worked full-time had a median weekly wage of $650 per week, or 80.5 percent of the $807 for men.

Report compiled by Staffing Industry Analysts, a sister company of Workforce Management

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Dear Just Asking:

PTO typically replaces sick, vacation and personal/floating holidays.

In 24/7 operations, such as hospitals or hotels, PTO can include some or all fixed holidays as well. About 24 percent of employers offer PTO, and this model has grown steadily in popularity. However, PTO isn’t necessarily a fit for all employers. In evaluating the feasibility of PTO, you should analyze utilization data and current balances, and understand your population demographics to determine the likely impacts of making this change.

Financial impacts
PTO is de facto vacation in some states (for example, California), and there are rules about cash-out upon termination and the ability to limit carry-over and set maximum accrual caps. Thus, PTO typically increases “booked” liabilities and cash costs if these financial treatments are a change from current policy for vacation, sick and personal/floating holiday time. Financial impact is the most common reason employers decide not to pursue a PTO model.

Productivity impacts
Providing PTO gives employees much-desired flexibility, but this may lead to an increase in the use of unscheduled time. Policies can balance this behavior, but the impact should be modeled, particularly for high-utilization populations such as call center or customer service employees. On average, expect that an hourly worker will use four out of every five days provided; salaried worker average is three out of five.

Administrative impacts
PTO is administratively simple—a single bucket of time, a single timekeeping code, etc. However, this may still require a change to payroll, timekeeping or HRIS systems. Many PTO conversions are delayed by the availability of IT resources.

Behavior impacts
If the employees are “users” and not “bankers” of time off (which you can determine through data analysis), the first year of PTO can be difficult. Prudent employees save time to bridge to a short-term disability plan, but some employees will use all of their PTO and be unprepared for a disability. After the first year, this behavior typically self-corrects. Good communication during the conversion can mitigate this impact.

Impact on other plans
Often employers use sick banks in lieu of a short-term disability plan. It may be financially prohibitive to allow employees to convert balances in sick banks into PTO. Thus, an employer currently using sick banks should consider offering a formal disability plan with the migration to PTO, or freeze these balances into an extended illness bank.

SOURCE: Ophelia Galindo, Buck Consultants, Orange, California, November 18, 2008

LEARN MORE: A guidebook on policy is helpful when starting a PTO effort.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Sickened:

Every fiscal year companies are required to assess their financial situation and determine how to manage benefit offerings within their established budgets. The size of the benefits budget ultimately determines the employer’s ability to maintain competitive benefit programs for all its beneficiaries, and this affects the level of employee contribution amounts that will be required.

There are many methods used to allocate employee contribution requirements, but the key is that employee contribution levels must always be nondiscriminatory. Secondary considerations tend to be ease of administration, communication, adverse effect on participation, and overall competitiveness.

A common method of allocating contributions is to charge a flat percentage of cost. This appears to be the method used by your organization—employees pay 12.5 percent. The total plan costs are then broken down into premium rate tiers (or premium equivalents if self-insured) to equitably spread the costs to all participants based on family status.

Although employees electing family coverage will continue to pay the same 12.5 percent contribution rate, their contribution cost will be higher. The primary advantage of your flat-percentage contribution method is that it solves most of the equity issues and enables you to openly share the entire cost of each benefit offering.

Regarding the timing of negotiating an employee’s election and corresponding contribution, the Internal Revenue Service regulates when participants can change their employee benefits elections under a pretax deduction plan. IRS rules only allow a midyear change to health, disability or group-term life insurance coverage elections when there is a change in the person’s family or employment status. New hires have 30 days from their employment date to sign up. Otherwise, employees must wait until the annual open enrollment period.

For most companies with calendar-year plans, November is the usual time when open enrollment is held. Therefore, if your organization is holding open enrollment, employees should make any changes to their family election now.

SOURCE: Dean Hatfield, senior vice president and health practice leader, Sibson Consulting, New York, November 6, 2008

LEARN MORE: Experts say premium increases are to be expected in coming months as employers subsidize a greater share of employees’ unpaid medical bills.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Pressed by Pay:

The reasons that people accept positions with a company vary widely, with pay being one factor as a candidate evaluates an offer. Alternatives to higher starting salaries are numerous, but at their essence should be determined in light of your company’s business strategy and human resources philosophy.

Are you a firm that can recruit and retain based on your corporate mission and vision (innovative, philanthropic, community service, religious, etc.)?

Does your firm have a reputation for providing employees with intrinsic benefits on which you can build a brand image?

How important is work/life balance, and do you walk the talk?

Can you provide employees with highly competitive noncash benefits instead of cash?

Are you able to provide a wealth of technical or other training and developmental opportunities?

Is your company a fun place to work?

The point: Don’t attempt to replace high starting salaries for recruits with something that will not fit with your company’s culture. The result will not be what your management is expecting.

Also, don’t interpret the current “buyer’s market” in labor for some jobs as an excuse to make low-ball offers to all candidates. Although this may work to hold down costs in the short run, it could be detrimental to long-term business performance. In this type of labor market, experienced candidates may accept any offer, even one involving pay cuts, but won’t be content until your company addresses this imbalance in some other meaningful way.

Before embarking upon this strategy, it is appropriate to analyze why it is important to management to reduce starting salaries. What are the important considerations in this decision? Once your company has outlined the business reasons changing its pay policy, your human resources department then needs to communicate it to managers, as well as adjust your recruitment strategy. In these difficult times, it is critical to not to be “penny-wise and pound-foolish” with pay. Experienced candidates, as well as high-performing employees, should be identified and compensated appropriately.

SOURCE: Bob Fulton, The Pathfinder’s Group Inc., Glenview, Illinois, November 19, 2008

LEARN MORE: Changing of pay practices is a hot topic amid the financial crisis. Some companies are slashing raises and planning layoffs, perhaps to weed out low performers.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter