Also visit our Health Care Reform Resource Page for the latest on the health care reform front, the Retirement Plans Resource Page for developments regarding retirement benefits, and the Workplace Flexibility Resource Page for postings on work/life issues.
For links/summaries to some of the best external compensation/benefits stories on the web, see below.
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For Besieged Cubicle Workers, a Cry for Help
At some organizations, management contends that consigning the white collar workforce to cubicles, at least below the executive level, boosts productivity and collegiality. New research finds just the opposite, reports the New York Times.
Cubicle culture is already something of a punch line among employees — how many ways can we find to annoy one another all day? Scientists, for their part, are measuring the unhappiness and the lower productivity of distracted workers. After surveying 65,000 people over the past decade in North America, Europe, Africa and Australia, researchers at the University of California, Berkeley, report that more than half of office workers are dissatisfied with the level of “speech privacy,” making it the leading complaint in offices everywhere.
• In general, people do not like the acoustics in open offices,” said John Goins, the leader of the survey conducted by Berkeley’s Center for the Built Environment. “The noisemakers aren’t so bothered by the lack of privacy, but most people are not happy, and designers are finally starting to pay attention to the problem.”
5/21/12
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Pay Clawbacks Raise Knotty Issues
J.P. Morgan Chase & Co., the nation's biggest bank by assets, is expected to try to claw back some of the pay it awarded to executives and traders at the unit at the center of a trading debacle that has cost it more than $2 billion, reports the Wall Street Journal.
Many Wall Street firms have expanded their clawback policies in recent years, but it isn't clear how often they have been used. Voluntary givebacks under pressure have been more common.
• Firms including J.P. Morgan and Morgan Stanley have expanded their policies to cover behavior that contributed to outsize losses or reputational harm, rather than outright fraud or financial misstatements.
5/17/12
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More Employers Offering Benefits to Domestic Partners
President Obama's stand last week in favor of same-sex marriage has no legal effect on employers' decisions on whether to offer benefits to workers' domestic partners, but some advocates believe it could reinforce a decade-long trend toward coverage, reports Kaiser Health News (via the Kansas City Star)
Last year, 52 percent of all employers offered domestic-partner health benefits, with the percentage varying widely by region and industry, according to a nationally representative sample of about 3,000 employers surveyed by benefit consultant Mercer. That's up from 31 percent in 2010.
• The biggest factors driving that change are employers' views on whether such benefits help them attract and retain desirable workers.
5/15/12
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Disability Coverage Baffles Most Workers
Nearly one in three women and one in four men in the U.S. can expect to suffer a disability that keeps them out of work for 90 days or longer at some point during their working years, a new survey shows. And most are clueless about coverage, reports FoxBusiness.com.
Two out of three Americans don't know what's covered by their disability plans, according to a national survey of 2,500 U.S. adults conducted on behalf of Wellpoint, a health benefits company.
• The survey found that two-thirds of the survey participants don’t have enough money saved to cover living expenses for three months and nearly a third still live paycheck to paycheck.
5/14/12
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Supreme Court Ruling Will Determine Employers' Health Strategies
Whether or not the Supreme Court rules in favor of the president's health care plan, companies are going to find a way to cut costs., reports Fortune via CNNMoney.com.
Prior to the reform law, America's largest employers had a plan for controlling their employee health costs. Reform didn't give them much of what they wanted.
• If the law is upheld, one response is to stop providing coverage for employees and let them buy it on the new exchanges. Another is for employers that self-insure to tweak coverage by raising co-pays or limiting the number of specialists in the network, thus nudging the sickest employees toward the exchanges. But if many employers were to take either of those roads, health reform's finances wouldn't work as intended, and the program would have to be altered.
5/11/12
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Indexed Target-Date Funds Catch On
Target-date funds that use only low-cost "passive" index funds rather than actively managed funds are becoming more popular with plan sponsors, reports InvestmentNews.com, citing research by Morningstar Inc. Last year, passive target date funds grew by 19 percent, while the active series grew 11 percent.
The cost equation is a motivation, as index-based offerings with lower costs and fees continue to exert competitive pressure in the target-date fund industry. Index funds also have less volatility compared with actively managed funds.
• Providers are answering plan sponsors' calls for greater selection in the passively managed target date arena.
5/10/12
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Drug Co-Pays Focus on Value
More U.S. employers are adopting value-based insurance designs that lower perscription drug co-payments for medicines to manage chronic conditions such as diabetes, high cholesterol and high blood pressure, reports NPR.org.
If employees take their medicines and stay healthy, they'll avoid costly treatment down the road. By slashing copayments, the companies hope to remove a hurdle that might discourage people from sticking with the drugs.
• As spending on specialty drugs grows, and despite the difficulties, some experts predict more employers will adopt "value-based" principles for their workers' coverage.
5/9/12
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Consumer-Directed Plans' Cost Savings Cited
Consumer-directed health plans could save billions for employers, providing relief from high health care costs, reports CBSNews.com, citing a new study published in the journal Health Affairs.
Researchers estimated that employers overall could reduce their health care costs by 7 percent if half of American workers were to enroll in the plans. National savings would total $57 billion annually, potentially allowing employers to pay higher wages or hire more workers. Two-thirds of the savings in the study came from people using less medical care. The remaining one-third came from frugal behavior such as opting for generic drugs or seeing specialists less often.
• The study found that workplace enrollment jumped from 4 percent of workers in 2006 to 13 percent in 2010. The trend continued last year, reaching 17 percent, says the Kaiser Family Foundation.
5/8/12
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Health Care Costs Worry Workers Nearing Retirement
Health care costs are a top retirement fear, and that's even though many older workers vastly underestimate how much they'll have to pay, reports USA Today.
The pre-retirees who expect health care to be their biggest retirement expense estimated that their average annual health care cost will total $5,621. But that is a drastic underestimate. Citing a 2011 Fidelity study, Nationwide says out-of-pocket health care expenses will average as much as $10,750 a year.
• "Nobody gives workers a clue" about the rising cost of health care, says Henry "Bud" Hebeler, a former Boeing executive who developed the retirement planning website analyzenow.com. "It's incredible how many have no idea what's coming at them."
5/7/12
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IBM Phased Retirement Program Limits Hours, Pay
IBM is offering employees who are nearing retirement -- and may be worried about a layoff -- a one-time voluntary program that would ensure their employment through Dec. 31, 2013. The program, called "Transition to Retirement," would cut a workers schedule and pay, but continue providing full benefits until the job guarantee's expiration date, reports ComputerWorld.
The program, described in a letter addressed to IBM managers, "offers participants 70% of their pay for working 60% of their schedule." Participating employees would receive "the same benefits they do today, most at a full-time level, including health benefits and 401(k) Plus Plan automatic company contributions."
• The new program provides managers with the ability to forecast their workforce needs and "to better plan for that transition."
5/3/12
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Wal-Mart Paying Millions for Overtime Violations
Wal-Mart Stores Inc. will pay $4.8 million in back wages and damages to more than 4,500 employees nationwide for unpaid overtime, reports the Washington Post.
• The Department of Labor said the company improperly considered the workers to be exempt from overtime pay, and the head of the DOL's Wage and Hour Division said she hoped the case would put other employers on notice.
5/2/12
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Hopeful Sign: Health Spending Is Flattening Out
The growth of health spending has slowed substantially in the last few years, attributable in part to changing behavior by consumers and providers of health care, reports the New York Times.
Many experts point to the explosion of high-deductible plans, in which consumers have lower premiums but pay more out of pocket, as one main factor. The share of employees enrolled in high-deductible plans surged to 13 percent in 2011 from 3 percent in 2006, according to Mercer Consulting. That means thousands of consumers with an incentive to think twice about heading to the doctor.
• One study by the RAND Corp. found that health spending among people who shifted into a high-deductible plan dropped 14 percent.
(To learn more, see the SHRM Online article "Study: CDH Plans Saved $9,700 per Employee over Five Years.")
4/30/12
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Occupy Boardroom: Shareholders Revolt
Shareholders across the U.S. are uniting, creating a movement that could be dubbed Occupy Boardroom. Long-term shareholders, including pension funds and mutual funds, are attempting to push out board members and fight back against executive pay packages, reports CNNMoney.com.
Last week, 55 percent of Citigroup's shareholders voted against CEO Vikram Pandit's $15 million pay package for 2011, a year when the bank's stock fell 44 percent.
• While the vote is nonbinding, it sends a clear signal to management that shareholders want change.
4/26/12
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Health-Promoting Social Games Catching On
Many companies are encouraging their employees to participate in health-related games that incorporate a social component, whereby people collaborate, compete and support one another in reaching a specific health goals, reports iHealthBeat.
Health insurers, including Aetna, Cigna and UnitedHealth, have stepped into the market with games that allow members to earn points and badges that can be redeemed for rewards of consumer goods, credits to health savings accounts and other incentives.
• An example: Humana launched HumanaVitality, a program that calculates a person's "Vitality Age" on completion of a health risk assessment and then creates a personalized plan for a healthier lifestyle. Each action taken toward a health goal earns points that are redeemable in a rewards mall with more than 600,000 items.
The Wall Street Journal also reported on this trend.
4/25/12
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Smaller Employers Increasingly Explore Partial Self-Funding
As employers continue to grapple with ever-increasing health care costs — with or without federal health care reform — those with fewer than 100 employees are increasingly looking for affordable options, with the idea of partial self-funding gaining traction in the past few years, reports North Bay Business Journal.
For smaller employers, a partially self-funded model would typically augment, rather than completely replace, a product by some of the large insurance carriers. A company with thousands of employees can more easily take on the risk of being self-insured because they have a much larger pool to spread that risk. A smaller employer, however, would need to determine if they would benefit from essentially going it alone in terms of their risk pool.
• Companies that are comparatively young — a tech start-up, for instance — might determine that other, less healthier companies within its policy are responsible for the annual premium hikes that nearly no employer has averted. Likewise if a company has a strong wellness culture and has fewer claims than another that may be more lax.
4/23/12
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Obesity Surpasses Smoking in Employee Health Care Costs
A study in the March issue of Journal of Occupational and Environmental Medicine provides new insights into the long-term costs of obesity and smoking, showing that both risk factors lead to persistently higher health costs throughout a 7-year follow-up period, reports insurancenewsnet.com.
Smokers, for example, carried average health costs that were $1,275 higher than those for non-smokers. But the incremental costs associated with obesity were even higher: $1,850 more than for normal-weight individuals. For those with morbid obesity, the excess costs added up to $5,500 per year.
• Smoking and obesity place a growing strain on an already stretched healthcare system, which is causing some employers to consider wellness programs – including smoking cessation and fitness programs – in an attempt to lower costs by reducing health risk factors.
4/19/12
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Shareholders Reject Pay Raise for Citigroup's CEO
It took a 14,999,999 percent pay increase to finally put the “say on pay” regulations in the Dodd-Frank bank reform to the test on Wall Street, reports CNNMoney.com.
Shareholders at Citigroup voted against giving CEO Vikram Pandit a $15 million raise for 2011. He had made $1 the year before.
• Although the vote is nonbinding, the company released a statement that said the company's board of directors will take the vote "seriously," and try to understand shareholder concerns.
4/18/12
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Focus on Quality of Life Makes for Healthier, Happier Employees
People are more likely to manage their condition properly when they have more accessible, personal goals, like being able to do more at work or keep up with their kids, instead of focusing only on comparatively abstract targets like blood-sugar levels, reports the Wall Street Journal.
• Studies show that when people have a higher sense of well-being, they have fewer hospitalizations and emergency-room visits, miss fewer days of work and use less medication. They're also more productive at work and more engaged in the community.
4/17/12
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Tax-Credit Health Care Rules Spurs Debate
A section of the health care reform law that outlines when low- and moderate-income employees can opt out of their employer’s coverage and instead get federal subsidies to buy insurance through new state-based exchanges has proved controversial, reports the Washington Post.
A proposed Treasury Department rule says workers and their families cannot qualify for those subsidies unless their employer’s plan is unaffordable because it exceeds 9.5 percent of their household income. Consumer advocates and some Democratic lawmakers oppose the rule because it bases affordability on how much employees would pay to cover themselves, not on the cost of covering their entire family. As a result, they say, many workers will be unable to afford family coverage, yet their spouses and children will be ineligible to get help to buy insurance.
• Employers and insurance brokers support basing affordability on individual coverage because it’s easier to administer. Employers also contend that there are other things they need a final decision on — such as the range of benefits they must offer — before they can estimate the cost of their plans in 2014.
4/16/12
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States Seek To Limit Co-Pays for Costly Drugs
Lawmakers in at least 20 states have introduced bills that would limit out-of-pocket payments by consumers for expensive drugs used to treat diseases like cancer, rheumatoid arthritis, multiple sclerosis and inherited disorders, reports the New York Times. New York State passed the first law prohibiting such high patient payments in 2010.
The bills aim to counter efforts by health plans to reduce the amount they pay for expensive medicines by making the patients pay a percentage, typically 20 to 35 percent, of the cost.
• Advocates say high co-payments discourage patients from taking their medicines.
4/16/12
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Still Waiting for Mental Health Parity Final Rule
In 2008, Congress passed and President George W. Bush signed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. Yet regulatory action has stalled since 2010. The final rule that would provide clarity to the millions who have a mental illness or substance-use disorder, and to their employers, has not been issued, according to an opinion piece in the Washington Post by former senators Pete Domenici and Gordon H. Smith.
This has created uncertainty and confusion for employers over what they must cover and when parity applies.
• The most recent National Survey on Drug Use and Health found that fewer than half of the 45.9 million U.S. adults with a mental illness receive treatment or counseling and that only 10 percent of the more than 23 million people who need help for a substance-use problem received any specialized treatment in 2010.
4/13/12
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Executive Pay Mandates Eased for 'Emerging Growth' and
Private Companies
The Jumpstart Our Business Startups Act, signed into law April 5, eases executive pay compliance for a new category of issuers: "emerging growth companies," according to an alert from Mercer.
Qualifying companies that go public after Dec. 8, 2011, are temporarily exempt from the Dodd-Frank Act's shareholder say-on-pay mandates and its pay-for-performance and internal pay equity disclosures. While exempt, these start-ups can follow the limited executive pay disclosure rules for "smaller reporting companies."
• The act also eases registration triggers for private companies issuing equity awards under employee pay plans.
4/12/12
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Colonoscopies Cheaper than Treating Colon Cancer
Although a colonoscopy is considered the "gold standard" for colon cancer screening, a new study finds that many patients are reluctant to have the test, reports Blue Cross/Blue Shield.
Only about 38 percent of those who chose or were assigned to a colonoscopy actually had one. And significant racial/ethnic differences existed in screening, with whites more likely than nonwhites to have a colonoscopy. Blacks had the lowest rate of colon cancer screening.
• There are many alternatives to colonoscopy, although they are less effective, such as a virtual colonoscopy or sigmoidoscopy, and often when people are given too many choices they may end up not doing anything.
4/11/12
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Pressure to Raise the Minimum Wage Rises
As "income inequality" emerges as an issue in President Obama's reelection campaign, lawmakers are facing growing pressure to raise the minimum wage, which was last increased at the federal level to $7.25 an hour in July 2009, reports the New York Times.
State legislators in New York, New Jersey, Connecticut, Illinois and elsewhere are pushing to raise the minimum wage above the federal level in their own states, arguing that $7.25 an hour is too meager. Massachusetts lawmakers are pushing for a big jump, with the Legislature’s joint committee on labor approving a measure last month that would raise the minimum to $10 an hour, which would leapfrog Washington State, whose $9.04 minimum is the nation’s highest.
• Many Democrats and their labor allies say that a public debate now over raising the federal minimum wage would put Republicans on the defensive during an election year and would encourage low-income Americans — an important part of the Democratic base — to go to the polls this November.
4/10/12
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In Target-Date Funds, a Hodgepodge of Styles
Target-date funds (TDFs) are an increasingly popular choice for 401(k) plans, but they are not immune to some well-worn fund and 401(k) maladies, including possibly high fees, reports the New York Times.
A vast majority of 401(k)’s offer only funds run by the plan provider. For the providers, keeping all assets in-house makes plenty of business sense. But for plan sponsors, who have a fiduciary responsibility to run the plan for the benefit of employees, being able to pick and choose among different managers would offer the chance to package a TDF made up of best-in-class funds.
• Then there is the debate over glide paths — the strategy that each fund uses to gradually shift assets for a given target date to a more conservative bent as retirement nears. There is no industry standard, and these paths vary widely.
(To learn more, see the SHRM Online article "Use of Target-Date Funds Continues to Surge.")
4/9/12
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More Small Business Chose to Self-Insure Health Coverage
Some 20 percent of U.S. companies with 50 to 199 workers self-insured medical costs in 2010, up from 14 percent four years earlier, according to a Rand Corp. analysis, reports Bloomberg Businessweek.
State insurance exchanges are expected to launch in 2014. In those markets, premiums will reflect the total risk of all the people insured, so companies with younger and healthier workers may decide they’re better off self-insuring to avoid subsidizing others with higher medical costs.
• The Rand report warns that such “adverse selection could lead to a ‘death spiral’ ” where only companies with high-risk workers are left in the exchanges, pushing up premiums.
(To learn more, see the HR Magazine article "Is Self-Insurance for You?")
4/6/12
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Are ETFs and 401(k) Plans a Bad Fit? Not Necessarily
Although low-fee exchange-traded funds (ETFs) have surged in popularity in recent years, they've failed to make much of a dent in 401(k) plans. That may be changing, reports the Wall Street Journal.
The ING Direct ShareBuilder 401(k) plan offers ETFs and nothing else—a model that a new plan from Charles Schwab Corp., set to make its debut next year, will follow. A plan from TD Ameritrade Holding Corp. allows plan sponsors to choose from among a menu of ETFs and mutual funds to offer their employees. The company says that in plans that offer ETFs, they make up about 40 percent of assets on average.
• One of the biggest factors keeping expenses down in these plans: All three companies have a brokerage wing, so they don't have to pay an external broker to make trades.
(To learn more, see the SHRM Online article "Exchange-Traded Funds: Less Expense for Your 401(k) Plan.")
4/5/12
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Many Medical Tests and Procedures Aren’t Needed, Say Doctors’ Groups
Many medical tests and procedures are performed when they aren’t needed, a new campaign by several doctors’ groups says, reports the Wall Street Journal.
Many of the examples on the initial lists, such as imaging scans, focus on services and situations that have long drawn concern about overuse.
• The American Academy of Family Physicians says antibiotics shouldn’t routinely be initially prescribed for acute mild or moderate sinus infections. Yet doctors say they often come under pressure from patients with sinus symptoms who want to be prescribed antibiotics.
4/4/12
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Americans Not Savings Enough in Their 401(k)s
There has to be greater education of employees on how to plan for retirement. Many people think that saving 6 percent with a 3 percent match, for example, is enough. Not so, according to the Center for Retirement Research, reports the Washington Post.
As a baseline, the group estimates that a household earning at least $50,000 needs roughly 80 percent of its earnings to maintain its pre-retirement lifestyle. To pull that off, a person who is 25 and earns $43,000 needs to be saving 15 percent a year in order to retire at 65, assuming a 4 percent rate of return on his investments. Wait until 35 to start saving, and the necessary savings rate creeps up to 24 percent.
• The solution for many people will be to work longer. If that 25-year-old doesn’t retire until 70, he would only have to save 7 percent a year.
4/4/12
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Minorities Take Costly Loans from 401(k)s
Nearly 9% of African Americans but only 1.7% of white workers took hardship withdrawals from their 401(k) plans in 2010, reports USA Today.
Half of African Americans and 40% of Hispanic workers carried a 401(k) loan balance at the end of 2010, vs. 26% of whites and 22% of Asians.
• The higher rate of 401(k) loans, withdrawals and cash-outs reflects the disproportionate impact of the recession on minorities, says Pam Hess, director of retirement research for Aon Hewitt, which co-sponsored the survey.
(To learn more about how 401(k) loans diminish retirement savings, see the SHRM Online article "Plug the Drain” on 401(k) Plan Leakage.")
4/3/12
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Employers Signal Near-Term Cuts to Health Benefits
Most U.S. employers say they are paring back benefits and pushing more costs to employees to keep benefits affordable. More than a third of 2,300 businesses surveyed in December 2011 by the Willis Group, a global benefits consulting firm, said they have increased employee contributions. A third said they are “considering coverage changes to migrate to a lower cost option,” reports American Medical News.
For the moment, they are continuing what they’ve been doing the last few years: moving more employees to consumer-directed health plans, paring back benefits, pushing up deductibles and shifting costs to their employees as the cost of coverage rises.
• Looking further ahead, employers are even unsure they will continue to offer health benefits. Just 23% of employers responding to the Towers Watson/National Business Group on Health survey said they were “very confident” they would offer benefits 10 years from now, down from 73% of employers who gave that answer in 2007.
4/2/12
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Family Health Care Costs to Exceed $20,000 This Year
The cost to cover the typical U.S. family of four under an employer plan is expected to top $20,000 on health care this year, up more than 7% from last year, according to early projections by independent actuarial and health care consulting firm Milliman Inc. In 2002, the cost was just $9,235, the firm said, reports CNNMoney.com.
The projected increase marks the fifth year in a row that health care costs will rise between 7% and 8% annually.
• While employers still shoulder a majority of health care expenses, employees have been paying a larger portion of the total amount every year, according to Milliman.
3/29/12
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Insurers Pay Patients Who Agree to Cheaper Care
Insurers have tried to cajole consumers into using less-expensive health care providers by promising lower co-payments and other cost-sharing breaks for members who select those doctors and hospitals. Lately, they're trying an even more direct approach: cash rewards, reports Kaiser Health News.
Some Anthem Blue Cross and Blue Shield members in New Hampshire, Connecticut and Indiana can receive $50 to $200 if they get a diagnostic test or elective procedure at a less expensive facility than the one their doctor recommended.
• The differences in costs can be eye-popping. According to Anthem data, in Manchester a hernia repair ranges in price from $4,026 on the low end to $7,498 on the high end. A colonoscopy could cost $1,450 to $2,973.
(To learn more, see the SHRM Online article "Costs Vary Widely for 'Shoppable' Procedures.")
3/27/12
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Small Business Wary of Health Reform Mandates
Since Lake Michigan Mailers began offering workers health insurance in the early 1990s, the company has considered the benefit as essential as paying wages. Now, the direct-mail business with just over 50 full-time equivalent employees doesn’t know if he can afford to offer coverage after next year, as many health care reform mandates take effect in 2014, report Bloomberg Businessweek.
This year, Lake Michigan Mailers switched all its employees to a high-deductible health plan to lower costs. The company pays 7% of the premiums, and workers pay the remaining $55 per month. Employees get free physicals and many screenings and then pay as much as $4,000 in out-of-pocket expenses before coverage kicks in. Most workers contribute to a health savings account (HSA) to pay for care. Whether the plan is generous enough to avoid the reform law's penalties is unclear.
• Employers “don’t know yet what is going to be considered an adequate offer of affordable coverage, so it’s a little hard to be making that determination,” says Gary Claxton, a vice president at the Kaiser Family Foundation, a health policy research group.
(To learn more, see the SHRM Online article "Health Care Reform Impacts CDHPs at Many Points.")
2/26/12
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For 401(k) Advisers, Time to Shelve Old Benchmarks
Participation rates are a commonly cited measure of success, but that doesn't mean much if workers are deferring only 3% of their salary. That's the point that advisers need to get across to employees, reports Investment News.
As workers are contributing to their plans, they should consider whether the investment mix they have is still appropriate, and continue evaluating that into retirement.
• Fee disclosure will require even fiduciary advisers to step up their game and provide more services to retirement plans.
2/22/12
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Revised DOL Fiduciary Rule Expected in May
The U.S. Department of Labor’s (DOL) Employee Benefits Security Administration, after withdrawing a proposed regulation to expand the definition of a retirement plan fiduciary, has announced it will repropose the regulation in May and said it will have even stronger consumer protections, reports CFO.
The reproposed fiduciary rule will primarily affect advisers and their fiduciary roles. However, plan sponsors should make sure that advisers have a strong documentable fiduciary process and make sure to include DOL-type protections in their service models.
• As many plan sponsors are becoming aware of their responsibilities as ERISA fiduciaries, they are also becoming aware of their inability to understand and comply with DOL and IRS rules and regulations, and are searching for ways to “outsource” their fiduciary responsibility. They also realize that they are neither trained nor skilled to interpret vendor reports, monitor vendor services and fees, ask probing questions, and negotiate effectively on behalf of plan participants.
3/21/12
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At Two Year Mark, Employers Wait for Health Reform Guidance
Among the outstanding questions that businesses are waiting to have answered at the second anniversary of the Patient Protection and Affordable Care Act is what kinds of services insurers will be required to cover as essential benefits, reports the Washington Times.
Last week, the administration released more than 600 pages of long-awaited rules on state-run insurance exchanges through which millions of Americans are expected to obtain base-line coverage. But health care players are still waiting for rules about the minimum coverage that plans in the exchanges must offer.
• No matter how they felt about the administration’s approach, states, employers and insurers are left with a laundry list of questions, including how they should go about approving a benchmark plan, how close a plan must come to meet the law’s requirements to be considered acceptable and how to define categories less commonly covered, such as habilitative services.
3/20/12
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EAPs Now Cover Host of Issues, Problems
Employee assistance programs (EAPs) once focused just on drug- and alcohol-abuse problems. Now, the scope of services is much broader, reports the Memphis Commercial Appeal.
EAPs help to resolve personal concerns that can affect worker performance. Concerns can include chronic pain, illnesses, substance abuse and mental health issues. EAPs can also help employees preoccupied by home problems. Domestic violence, divorce, elder or child care, parenting, gambling and financial hardships are common troubles.
• One-on-one counseling is the mainstay of EAP services. Modern technology can enhance services through instant messages, texts, e-mail, phone calls and interactive computerized training. Counseling might also relieve worries in situations such as layoffs, mergers, employee suicides, deaths and accidents.
3/19/12
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CBO Says Millions Could Lose Employer-Provided Health Coverage
A substantial number of Americans could lose their employer-provided coverage under health care reform, reports The Hill, citing new research by the nonpartisan Congressional Budget Office (CBO).
The best estimate, subject to a "tremendous amount of uncertainty," is that about 3 million to 5 million fewer people will obtain coverage through their employer each year from 2019 through 2022, according to the CBO.
• Under CBO's best estimate, 11 million mostly low-wage workers would lose their employer coverage. About 3 million would choose to drop their coverage to go into the new subsidized health exchanges or on Medicaid, while another 9 million would gain employer-sponsored coverage, for a net total of 5 million people losing employer coverage in 2019.
3/16/12
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Employees May Balk at Their 401(k) Fees
In the months ahead, when employees across the country open the quarterly statements from their retirement savings plan, the executives overseeing those plans may face some tough questions, reports the Washington Post.
Where explicit fees are being paid by the plan, employees will see the dollar amount charged to their account. Employees may experience confusion and become upset if the fees come as a surprise and there’s no explanation.
• For executives concerned about employees’ reaction to the new fees, the best defense is proof that the company did real due diligence in analyzing its plan fees and determined they are reasonable.
(To learn more, see the SHRM Online article "A Checklist for Participant Fee Disclosures in 2012.")
3/15/12
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Employers Dangle Carrots for Behaviors That Help Lower Costs
About 20 percent of U.S. companies said they used penalties, like higher premiums or deductibles, if workers did not complete health management programs. That is roughly double the number of companies that used penalties in 2009, reports the New York Times, citing a new survey by Towers Watson and the National Business Group on Health.
Companies are also focusing on employees’ spouses, because they are important influences on their families’ overall health environment. For the typical company offering incentives, the maximum cash award for meeting health targets was $300 for an individual and $700 for a worker and family combined.
• Nearly all companies with an achievement-based program said they included weight goals as a requirement under the program, determined by body mass index, or waist-to-hip or body fat measurement. Three-quarters of companies include blood pressure, cholesterol and tobacco use as yardsticks.
(To learn more, see the SHRM Online articles "Health Care Benefits Changes on the Horizon" and "Companies Increase Wellness Incentive Dollars.")
3/14/12
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Pension De-Risking: Ford Offers Lump-Sum Payouts to Salaried Retirees
Ford Motor Co will offer lump-sum payouts as an option for future salaried retirees in the United States as part of its push to decrease the risk presented by its pension obligation, reports Reuters.
The automaker said it was exploring other options to "de-risk" its pension plans. Ford already said it would pour $3.5 billion cash into its plans and is shifting those assets more heavily toward bonds.
• General Motors Co announced a lump-sum payment option for its white-collar workers last month and said it was moving its veteran white-collar workers to 401(k) retirement plans to reduce future pension liabilities.
(To learn more, see the SHRM Online article "Five Key Pension Risk Management Tips.")
3/12/12
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Wal-Mart and Merrill Lynch to Pay $13.5 Million
to Settle Claims of Excessive 401(k) Fees
Wal-Mart Stores Inc., the largest U.S. private employer, and Merrill Lynch won a judge’s final approval to pay $13.5 million to settle claims the retailer’s employees were charged excessive 401(k) fees, reports Bloomberg News (via Treasury & Risk).
• Wal-Mart was accused in the suit of failing to offer retirement plans that limit the amount of fees and expenses that are charged when employees make investments. The complaint also included an allegation that the improper administration of the plans.
3/9/12
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A Shrinking Number of Long-Term Care Insurers
Several big insurers are cutting back on sales of long-term care insurance, reports the Wall Street Journal.
Over the past 25 years as the coverage gained popularity, it has proven tricky for insurers. Many have had to repeatedly seek approval from state insurance departments for price increases to offset costs they didn't anticipate. Policyholders are living longer and generating more in claims than initially projected, industry participants said.
• The shrunken market still includes about 10 major insurers selling to individuals and a number of large ones continue to sell coverage to employer programs.
(To learn more about long-term care insurance, see the SHRM Online article "Planning for the Future: Long-Term Care as an Employee Benefit.")
3/8/12
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Apple's Innovative 401(k) Turns to Exchange-Traded Funds
Apple is not just an innovator in the technology sector; it's an innovator in how it manages its 401(k) retirement plan by placing the bulk of plan assets in low-cost exchange-traded funds (ETFs), reports Nasdaq.com (citing Bloomberg and other sources).
Although the 401(k) market is still dominated by traditional mutual funds, ETFs are changing the dynamics of the retirement plans market.
• The annual expense ratios for ETFs are consistently lower compared to mutual funds in the same investment category. The money saved by 401(k) participants from lower investment fees can translate into a substantial increase in retirement income. New fee disclosures requirements are prompting plan sponsors to consider lower cost investments.
(To learn more, see the SHRM Online article "Exchange-Traded Funds: Less Expensive 401(k) Plans.")
3/7/12
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Last Minute FSA Moves
Those who don't spend the remaining 2011 funds in their flexible spending accounts (FSAs) may be just days away from losing the money altogether, as the March 15 "grace period" deadline nears, reports SmartMoney.
Even those with two weeks' time left might find that it's tough to schedule a doctor's appointment or an orthodontic consultation before the deadline.
- Even if a plan's grace period has come and gone, employers usually allow extra time to submit claims. Some will accept claims on 2011 expenses as late as June 2012,
(To learn more, see the SHRM Online article "Reminder: Grace Period Tips to Spend Down FSAs.")
3/6/12
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Unfunded Law Firm Pensions Burden Young Partners
At some of the top law firms in the U.S., younger lawyers will foot the bill for deluxe pension plans that could drag down their own earnings for years to come, reports the Wall Street Journal.
These pensions are largely unfunded: there is no money saved to pay retirees. Instead, most law firms with such plans pay the benefits as they go, using a portion of their current profits.
- Partners at some elite firms are often entitled to between 20% to 30% of their peak pay after retirement—in many cases, for life, according to partners and law firm consultants. For the most profitable firms, that could mean payments of $400,000 to $600,000 a year per retired lawyer.
3/5/12
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Successful 401(k) Education Programs –
Does Yours Measure Up?
Industry experts share their experiences of the ugly, bad and good of 401(k) education programs, reports Fiduciary News.
An improper method of education as “passing out enrollment booklets and expecting folks to read the material and fill out the forms,” said one expert.
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Symptoms of less than satisfactory means of education include “those delivered on the internet only, those taught at too high or too low of a level, those presented less than once a year, and those only focusing on investments and not tying it into personal goal achievement.”
3/2/12
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Debate Over Sick Leave Intensifies
The debate over governments mandating that private employers provide paid sick leave is intensifying around the U.S., reports the Wall Street Journal.
Connecticut in January became the first state to require paid sick leave, though businesses with fewer than 50 workers are exempt. Seattle will mandate paid sick time starting in September, even for firms of a relatively small size. One federal proposal, which President Obama has backed, would require employers with 15 or more workers to provide seven paid days for their own or a family member's illness.
- Business owners are wary of the possibility of a lapse in their operations if paid sick leave days are abused. Overall, the direct cost of incidental absences is only about 2% of the payroll, according to benefits consultancy Mercer. But indirect costs from unplanned incidental absenteeism—including finding replacement workers, paying overtime, filling out additional paperwork, and disruptions to their businesses that might hurt customer service—amount to about 3.8% of payroll, Mercer estimated.
3/1/12
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Prescription Drug Abuse and Fraud Drives Up Health Costs
Over the past decade, prescription drug abuse in the U.S. has increased rapidly, to the point that the Centers for Disease Control and Prevention now labels the problem an “epidemic,” reports CNNMoney.com.
One study puts the potential overall cost of painkiller abuse at more than $70 billion a year.
- Insurance plans take a hit when abusers accumulate drugs by obtaining multiple prescriptions or by visiting unscrupulous distributors known as "pill mills."
2/28/12
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Businesses Turn to High Deductible Medical Insurance
Advocates say high deductibles can help put a lid on rising medical costs by motivating people to adopt a healthier lifestyle and shop for affordable medical providers. Also people who pay the full cash value of services, say the proponents, will be less inclined to overuse them. Critics say it is wrong to place responsibility for determining the need for medical care on the shoulders of the insured, reports The Press Enterprise
The main purpose of a high deductible is to lower premiums. In California, medical insurance premiums have increased 153 percent since 2002, which is more than five times the rate of inflation, according to the California Benefits Survey by the California HealthCare Foundation.
- Last year the average monthly medical premium to insure an individual worker in California who had a deductible of $1,200 or more was $381. That compared to an average monthly premium of $474 for an HMO plan and $545 for a preferred provider plan.
(To learn more, see the SHRM Online article "Study: CDH Plans Saved $9,700 per Employee over Five Years.")
2/27/12
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How to Fix Executive Compensation
For starters, don't link pay packages just to stock. Tie them to the company's debt as well. That will help ensure that executives reap big rewards for long-term success, not just a short-lived bump in the stock price, reports the Wall Street Journal.
Tying bosses' pay to the levels of debt at the business will dissuade them from taking risks that might alienate creditors.
- Other recommendations: Prevent executives from selling company stock until several years after it's ranted will give them a powerful incentive to think long term. And updating the compensation package to reflect changing conditions in the market and the company to ensure that managers' interests stay aligned with those of the company and its shareholders.
2/27/12
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Women Have Tougher Time Saving for Retirement
More men than women have determined how much money they’ll need to retire, have set aside money in their investments for retirement and feel confident that they’ll reach their goals, reports Business Insider, citing a 2012 survey.
Many women take time out of the workforce to focus on their families ,which means they’re automatically operating at a loss when it comes to money earned. It’s likely that their retirement accounts will reflect this.
- Among the advice offered to promote savings: Encourage participants to increase the contribution to their retirement accounts by an additional 1% every quarter. It won't be missed too sorely, and after four quarterly increases they will have increased their contributions by 4%.
2/23/12
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Court Action Could Prolong Health Care Fight
Next month's Supreme Court challenge to the Patient Protection and Affordable Care Act – the Obama administration's health care reform law – could affect the care available to most Americans, alter the balance of power between Washington and the states and remain a flash point through this presidential campaign, reports USA Today.
But looming over the case is a federal policy that restricts the timing of lawsuits connected to the assessment and collection of "any tax." On the first day of their historic session March 26-28, the justices will consider that policy and address whether people who challenge the insurance requirement must first pay the disputed tax and seek a refund before bringing a lawsuit. If the answer is yes, the legal fight over a key part of the law could be delayed, possibly until 2015.
- None of the main parties to the litigation is arguing for that option, which would prolong confusion over the law's constitutionality. Yet the high court could find that the law demands it.
2/22/12
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Options for Payment Reform in U.S. Health Care
How money enters the health system – and how much enters – has a powerful influence over the shape and modus operandi of health care delivery. So it's not surprising that “payment reform” has become the new battle cry as the U.S. seeks better control over the annual increases in health spending per capita, reports the New York Times.
A major disadvantage of the fee for services payment method is the strong financial incentives it creates to prescribe for and deliver to patients more health care than may be clinically warranted by best-practice standards.
- While fee for services payment is generally thought to result in overuse and misuse of health care services, bundled payments, capitation, budgets or physician salaries carry with them the risk that clinically desirable services are withheld from patients for financial reasons or simply because exertion is not rewarded.
(Note: The article does not discuss consumer-driven health care designs, which seek to provide consumers with incentives to avoid unnecessary overuse of health care services and to be cost conscious when purchasing nonemergency care. See, for instance, the SHRM Online article Cigna Study: CDH Plans Saved $9,700 per Employee over Five Years.)
2/17/12
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Congress Reaches Final Payroll Tax Cut Deal
Congressional negotiators have resolved all differences on a deal to extend the payroll tax cut and unemployment benefits while avoiding a fee cut for Medicare doctors for the rest of the year, leaving only technical issues to sort out, reports CNNMoney.com.
The roughly $100 billion payroll tax cut, a key part of Obama's economic recovery plan, has reduced how much 160 million American workers pay into Social Security on their first $110,100 in wages. Instead of paying in 6.2%, they've been paying 4.2% for the past year and two months. The break is worth about $83 a month for someone making $50,000.
- While a number of conservatives are upset that the deal will add to the deficit, some GOP House members have nevertheless said they expect the package to ultimately pass with support from a majority of Republicans as well as Democrats.
2/16/12
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GM Freezes Pension for Salaried Workers
General Motors said that its salaried employees would stop accumulating pension benefits later this year as the company tried to narrow a large shortfall in its retirement funds, reports the New York Times.
Starting in October, the 19,000 salaried workers who have been covered by GM’s pension plan will be shifted to a 401(k) plan, though they will not lose any of the pension benefits they have accumulated. The change affects only workers hired before 2001, when the company stopped putting new salaried employees into the pension plan.
- GM also announced that 26,000 salaried employees in the U.S. would receive bonuses but no across-the-board pay raises this year. They will receive one additional week of paid vacation time going forward.
2/16/12
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Should Equity Compensation Extend to Average Working Jills and Joes?
Company stock is playing a larger role in executive compensation but a smaller role in compensation for the rank and file, reports Reuters.
"Companies have been cutting back on who is eligible for stock rewards," says Corey Rosen of the National Center for Employee Ownership. "The goal should be to get as many people involved as you can," he says, singling out companies like Starbucks, Southwest Airlines and Whole Foods for their commitment to broad-based equity programs. "It's much better to spread equity around, because it leads to lower turnover and better performance."
- In the Society for Human Resource Management's 2011 Employee Benefits Survey, only 10 percent of companies report having stock-purchase plans (which give staffers the opportunity to buy equity in the firm, usually at a significant discount like 15 percent). That's down almost half from 2008, when 19 percent of companies did so.
2/15/12
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Payroll Tax Cut Extension Appears Likely
House Republican leaders said on Feb. 13 that they will support extending the federal payroll tax holiday through the end of the year without demanding spending cuts to pay for it, bringing them in line with the Democratic-controlled senate, reports the Washington Post.
There is a sense that the uncertainty that once surrounded the fate of the payroll tax holiday has lifted: All sides agree that it will be extended and there will be no repeat of a pre-Christmas showdown over the tax benefit.
- The temporary payroll tax cut slated to expire at the end of February dropped individuals’ withholding rate to 4.2 percent from 6.2 percent, giving the average worker an extra $80 a month.
2/14/12
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401(k) Annuity Proposals Don't Address Liability Concerns
Proposed new rules aimed at giving 401(k) plan participants more options to invest in annuities providing a guaranteed lifetime income stream may prompt some plan sponsors to offer such investments. But the proposals laid out jointly by the Labor and Treasury departments on February 2 don’t go nearly far enough to persuade a majority to do so, reports CFO.com.
The plan sponsor has a duty to pick an insurance company that will be able to make annuity payments for all of plan participants’ retirement years. “You’ve got to pick a provider that’s going to be around for 50 or more years,” says Robyn Credico, director of defined-contribution consulting at Towers Watson. “But many insurance companies have financial challenges and took bailout money, so employers are pretty reluctant to take that step.”
- Or what if a plan sponsor tells a participant that, based on what the person has saved, he or she will get $500 a month from a retirement annuity — but ultimately he or she gets only $300? Could the plan sponsor be liable? The answer is not yet clear
(To learn more, see the SHRM Online article "Treasury Guidance Promotes Annuitizing Plan Payouts.")
2/13/2012
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White House Compromise Retains No-Cost Contraceptive Coverage
Seeking to allay the concerns of Catholic leaders, President Obama on Friday announced an adjustment to its health-care rule requiring religiously affiliated employers to provide contraceptive coverage to women, reports the Washington Post.
Women still will be guaranteed coverage for contraceptive services without any out-of-pocket cost, but will have to seek the coverage directly from their insurance companies if their employers object to birth control on religious grounds.
- Religiously-affiliated non-profit employers such as schools, charities, universities, and hospitals will be able to provide their workers with plans that exclude such coverage. However, the insurance companies that provide the plans will have to offer those workers the opportunity to obtain additional contraceptive coverage directly, at no additional charge.
(To learn more, see the SHRM Online article "Administration Affirms, then Adjusts, Contraceptive Mandate.")
2/10/12
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Out-of-Network Costs Up as Insurers Tie Payment to Medicare Rates
Consumers have long complained about the cost of going outside their health plan's network, but a growing number of insurers have changed the way they calculate reimbursements to shift even more of the expense to patients, reports USA Today.
Instead of paying a percentage of the "usual and customary" charges from physicians and other providers, insurers are basing reimbursements on a percentage of what Medicare pays, which can be much less.
- "Every carrier is moving to this," says Ken Sperling, global health care practice leader at the benefit consulting firm Aon Hewitt. Many employers welcome the change as a way to slow rising premiums, but some "employees are going to get stuck shouldering a significant portion of the bill because they don't understand how it's done," Sperling says.
2/9/10
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Federal Employees to Get Roth Option
Proposed rules lay the groundwork for the addition of a Roth alternative for federal employees through the Thrift Savings Plan (TSP), reports the Washington Post.
The TSP is a 401(k)-style retirement savings program open to federal and postal employees as well as to members of the uniformed services and retirees. Some private-sector 401(k) plans model themselves on the federal TSP.
Investments through a Roth design are made with after-tax money that, along with its earnings, will be tax-free on withdrawal.
- Newly hired employees, who invest 3 percent of salary by default unless they choose a different amount or opt out entirely, will have those investments made under the traditional design unless they choose the Roth design.
2/9/2012
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Tech Companies Seek Change in Overtime Law
A high-tech industry-led campaign seeks to reclassify some tech workers as exempt from overtime, reports the Los Angeles Times. Some of the multinational firms behind the effort, such as IBM and Intel, are lobbying to revise federal labor law to allow them to give their computer employees more flexible work schedules without overtime. They say the changes are necessary to keep jobs from going overseas, where technology workers are paid a fraction of U.S. wages.
Under the Fair Labor Standards Act (FLSA) computer employees who are paid fixed salaries of at least $455 a week ($23,660 per year) or who get hourly wages of at least $27.63 and who perform job duties such as systems analysis and programming are classified as exempt from automatic overtime pay.
- Employers seek the changes as class-action lawsuits by employees seeking back pay for overtime and missed breaks have risen dramatically over the last decade.
2/8/12
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Payroll Tax Cut Extension Stalls Again
Facing an end-of-month deadline before the 2 percent payroll tax holiday expires, lawmakers appear no closer to a deal, reports CNNMoney.com.
- With talks stalled, congressional leaders of both parties suggested the delay is intentional, arguing the other side actually sees an election-year political advantage in no deal being reached.
2/8/12
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California Court Voids Ban on Same-Sex Marriage
A federal appeals panel in San Francisco ruled Tuesday that California’s ban on same-sex marriage violates the constitutional right to equal protection, reports the San Francisco Examiner.
Opponents of same-sex marriage have the option of appealing Tuesday’s decision to a larger panel of the U.S. Court of Appeals for the 9th Circuit or taking it directly to the Supreme Court, which might simply leave the appellate ruling voiding the marriage ban in place.
- For now, the decision is stayed pending appeal. Pursuit of an appeal could take months, or even years, legal analysts said.
2/8/12
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New York City vs. Unions: Benefits and Pensions to Cost More than Pay
Pensions and benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Mike Bloomberg revealed, reports the New York Post.
Salaries for police, fire, correction and sanitation workers totaled $7.617 billion in fiscal 2012 and are projected to drop slightly. Benefits and pensions are heading in the other direction — $7.497 billion in 2012 vs. $7.63 billion in 2013.
- “There’s no one in the private sector that comes even remotely close to that,” the mayor declared. Harry Nespoli, president of the Uniformed Sanitationmen’s Association, shot back, “There’s no reason to change our pensions at all.”
2/7/12
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Facebook Pics Lead to
Workers’ Comp Denial
An injured worker in Arkansas was denied an extension of disability benefits after his former employer and insurance company unearthed pictures from social networking sites that showed him "drinking and partying," according to the judge who turned down his appeal, reports MSNBC.com.
The employee suffered a hernia when a refrigerator fell on him. His insurance company and his employer, a furniture and appliance retailer, paid for medical expenses and disability payments. When the employee applied for an extension of those benefits, he was turned down by a judge and the workers' compensation commission.
- The insurer and the retailer had submitted pictures of the employee taken from Facebook and MySpace, arguing that the pictures proved his injuries were healed.
2/6/12
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White House, Religious Groups in Fight over Health Care Reform
The Obama administration’s decision requiring church-affiliated employers to cover birth control and related services has caused an uproar among Roman Catholics and members of other faiths, reports the AP/Washington Post
Workplace health plans will have to cover all forms of contraception approved by the Food and Drug Administration, ranging from the pill to implantable devices to sterilization. Also covered is the morning-after pill, which can prevent pregnancy after unprotected sex and is considered tantamount to an abortion drug by some religious conservatives.
- Many conservatives are supporting legislation by Rep. Jeff Fortenberry, R-Neb., that would codify a series of exceptions to the new health care law on religious and conscience grounds.
(To learn more, see the SHRM Online article "HHS Reaffirms Contraceptive Mandate.")
2/3/12
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Time Running Out on Payroll Tax Cut
Despite bipartisan support on Capitol Hill for extending a temporary payroll tax cut for the rest of 2012, lawmakers have yet to close the deal, reports CNNMoney.com.
- The sticking point for lawmakers is how to pay for an extension—the very same reason that tripped them up when they tried to negotiate a full-year extension in December.
2/3/12
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Help Disclosing 403(b) Plan Fees
Just as many teachers are seeing pensions shrink, they're relying more on costly 403(b) retirement plans that are not covered by the new federal fee disclosure rules, reports USA Today.
Public school employees have no help from their school systems in making informed investment choices, so an industry task force, including the National Education Association, has launched an industry standard, called the 403(b) Model Disclosure Form.
- Although schools will not be required to adopt the model disclosure form, the NEA hopes they will use it to better educate their employees about the retirement fund options.
2/1/12
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'Global Payment'' Health Plans Gaining Ground
In just three years, a new way of paying for medical care has spread rapidly across Massachusetts under that state's version of health care reform, and now more than 1.2 million people are covered by plans that put providers on a budget in an effort to restrain health spending, reports the Boston Globe. This means that about one in five Massachusetts residents are being treated by doctors working under these new cost-conscious arrangements.
Governor Deval Patrick called on legislators last week to eliminate the traditional fee-for-service system that pays health care providers separate fees for every procedure, test, and office visit.
- Adoption of these “global payment’’ plans is driven by a desire to control soaring health insurance premiums by giving physicians an incentive to be more sparing in their use of expensive procedures, such as sophisticated scans.
1/31/12
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401(k) Plans Step Into the Sunshine
Spurred by the U.S. Labor Department's effort to force plan administrators and investment companies to disclose the cost of 401(k) retirement plans, companies are looking to reduce fees and offer new investing choices, reports the Wall Street Journal.
- Analysts and companies in the industry say the increased disclosure will allow companies to negotiate better deals and employees to request more cost-efficient plans. Already, the prospect "is putting downward pressure on fees," said Lori Lucas, leader of consulting firm Callan Associates Inc.'s defined-contribution practice.
1/31/12
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Corporate Pension Forecasts Called Too Sunny
"Many corporate pension plans If you were a better stock picker than Warren Buffett, would you be punching the clock every day as the faceless manager of a corporate pension plan?," asks the Wall Street Journal. "Judging by many companies' recent financial statements, they must believe their pension plans are run by such unheralded baby Buffetts."
These expectations for future stock returns at major companies remain stubbornly high—often between 12% and 16%, or nearly twice what Mr. Buffett himself seems to believe the pension plan he oversees can earn on stocks. Such rosy hopes may not survive the collision with reality.
- At today's low interest rates, the expected 9.53% overall return on General Mills' pension plan, with30% in bonds, implies a 13.6% annual gain for stocks and alternative investments. Hewlett-Packard, with 60% in bonds, would require 15.6% on stocks to meet its target of 7.6% for the plan as a whole. Such high returns from stock holdings are viewed as highly unlikely.
1/31/12
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VEBAs Help Save Retiree Health Plans
Retirees of companies in bankruptcy protection have an option unavailable to retirees of companies that are healthy but eliminate retiree health coverage anyway: the Health Coverage Tax Credit, or HCTC, a federally funded program administered by the IRS, reports the Wall Street Journal.
In 2009, Congress expanded HCTC coverage to include benefits sponsored by Voluntary Employee Benefits Associations, or VEBAs, which are trust funds established during the bankruptcy process to provide retiree health benefits.
- In a little-noticed move last October, a New York bankruptcy court judge approved the creation of the first industrywide VEBA, which will provide benefits to retirees of failed auto-parts manufacturers based in Ohio, Michigan and Wisconsin. Retirees in the auto and steel industries are planning to roll out VEBAs in March and April 2012.
1/30/12
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Prepare for Health Plan Participant Fee
Under health care reform, plan sponsors of self-funded health plans and health insurance issuers will owe a new fee that is first payable for plan years ending after Sept. 30, 2012. For calendar year plans this means the fee applies this year, according to an alert from law firm Dorsey & Whitney LLP
The fee amount is $1 x Average Number of Covered Lives in 2012, and $2 x Average Number of Covered Lives in 2013 and subsequent years (adjusted for inflation) until 2019. The issuer of the policy must pay the fee for fully insured accident group health plans, and that the plan sponsor must pay the fee in the case of a self-funded health plan.
- Many questions about the fee are currently unanswered, including when it must be paid. Proposed regulations are expected on this and other matters. In the meantime, Notice 2011-35 provides information for plan sponsors and issuers to ensure they have properly budgeted for this expense.
1/30/12
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Health Cost Saving Tips for CEOs
Employee health costs have now become the third-largest expenditure for U.S. businesses today, constituting 8% of total compensation, reports Bloomberg.com. And they are rising fast, more than doubling in just the last decade to more than $15,000 a year for family coverage. Of that cost, 73 percent is paid by the employer.
Employees and employers alike -- but first and foremost the boss -- need to be held accountable for reducing the cost burden that is damaging so many companies’ bottom lines.
- Recommendations to business CEOs includes: Give incentives to insurance brokers tied to the amount by which they can reduce a plan’s costs, not a plan’s benefits; use one of the new breed of transparent pharmacy benefits managers (PBMs) that provide health plan members and administrators with drug price sheets and claims data; join with other companies in employer-owned cooperatives to reduce costs; and contract directly with providers in areas such as mental health services.
1/26/12
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Employer Did Not Communicate FMLA Policy and Cannot Fire Worker, Appeals Court Rules
An employer that failed to communicate its method of calculating Family and Medical Leave Act benefits cannot terminate a worker for violating its policy, a federal appeals court has ruled, reports Business Insurance.
Under the law, according to the appeals court, there are two methods employers can use to calculate a worker's FMLA leave: “rolling” and “calendar.” Under the rolling method, an employee's leave is calculated backward from the date an employee uses any FMLA leave. Under the calendar method, an employee is eligible for 12 weeks of FMLA leave each calendar year.
- The employee contended the company failed to inform him that it used the rolling method, and the appeals court agreed.
1/25/12
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Bishops Will Sue Federal Government Over
Mandatory Contraception Coverage
The U.S. Conference of Catholic Bishops is promising a legal challenge to federal rules the Obama administration reaffirmed on January 20 requiring health insurers to provide women with a range of preventive health services, including birth control, without charging a co-payment, co-insurance or deductible, reports Kaiser Health News.
The Department of Health and Human Services made no changes to a rule released in August that exempted some religious organizations, like those that employ or serve people who follow its religion, from the requirement. But religious organizations that do not meet those qualifications would be required to provide contraceptive coverage to employees. While churches are exempt, for example, religious universities and hospitals are not.
- The rule goes into effect Aug. 1, 2012. Religious institutions that aren’t exempt get an additional year, until Aug. 1, 2013, to comply with the regulation.
1/23/12
(To learn more, read the SHRM Online article "Obama Administration Reaffirms Contraceptive Mandate.")
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Fired for Working Too Much (Off the Clock)
Many employees today are finding themselves caught between incompatible demands by companies that 1) want work to get done, 2) do not want to pay overtime and 3) are paranoid about potential lawsuits, reports Time.com's Moneyland blog.
As lawsuits and regulatory enforcement increase against employers that pushed nonexempt employees to work off the clock, employers are responding by not allowing employees who wish to do so to work on their own time, and even firing employees who do so.
- An Illinois appellate court ruled that firing someone for working through their lunch break is not grounds to deny that worker unemployment benefits.
1/20/12
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Retirement Benefits Helped Drive Kodak into Bankruptcy
Eastman Kodak Co. has twice as many retirees drawing benefits in the U.S. as it has active employees world-wide, which was a key factor in driving the company into bankruptcy, reports the Wall Street Journal.
Kodak's hefty obligations to its retirees have long limited the company's strategic options. The company said in a filing that retirement benefits accounted for the single largest drain on the company's cash in 2011, consuming $119 million. Chief Executive Antonio Perez said the company aims to use Chapter 11 to "fairly resolve our legacy costs."
- Scaling back what it owes retirees during its stay in bankruptcy court would leave thousands of its former employees in danger of becoming the next group of Americans to see their promised retirements benefits—mainly retiree health care—disappear.
(Also see "Kodak Bankruptcy Shows The Risks Of Nonqualified Deferred Compensation," via MyStockOptions.com)
1/20/12
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Pricing War Could Cut Drug Costs
Starting January 2012, plan participants at most companies that contract with Express Scripts for pharmacy benefit management (PBM) services can no longer get prescriptions filled at any of Walgreen's approximately 8,000 U.S. locations. The two companies were unable to reach an agreement to renew the contract under which Express Scripts paid Walgreen to fill its clients' prescriptions, reports CFO.
Sean Brandle, vice president of the national pharmacy practice at The Segal Co., said the dispute could lower prescription-drug costs. "I think this case points toward more plan sponsors looking at limiting retail networks. The light bulb goes on: if a major PBM can exclude a major retailer, then why couldn't a company that doesn't use Express Scripts decide it doesn't want certain pharmacies in its network?"
- The company's PBM could then go to the network's remaining pharmacies and negotiate better pricing based on the volume boost they'd get from a big pharmacy's removal from a network, said Brandle.
1/19/12
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Options for 401(k) Plans Get More Affordable
As employers prepare for new federal rules requiring them to explain how fees affect 401(k) returns, industry providers are rolling out better, lower-cost plans, reports USA Today.
The Department of Labor rule “is a big driver of change,” says Mike Alfred, CEO of BrightScope, a provider of independent retirement plan ratings and investment research. “Everyone recognizes that fees will be under the microscope.”
- The new plans are aimed at helping small and midsize employers, which in the past have been unable to offer their workers the lowest-cost plans.
1/18/12
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Americans Raiding Retirement Savings
Loans taken from retirement savings accounts jumped 20 percent in 2011 across all demographics, according to a survey by Aon Hewitt, reports the New York Times. Among lower earners, loans from retirement savings leapt by as much as 60 percent.
The Employee Benefit Research Institute's (EBRI) annual retirement confidence survey hit a new low in 2011 with 27 percent of workers saying they're "not at all confident" they'll have enough for a comfortable retirement. Almost 15% expect to work until at least the age of 70, up from 11 percent in 2006, the article reports.
- EBRI found that more than 20 percent of those aged 50 or older changed their medical prescriptions to save money and almost as many had skipped or postponed doctor appointments for the same reason. Almost 28 percent reported having difficulty paying their monthly bills.
1/17/12
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Employer Health Fair Saves Employee's Life
By participating in a health fair through his employer, James learned he had prostate cancer. Without the screenings, he would likely have not received the appropriate care in time to effectively treat his cancer, reports the Herald-Citizen.
- James now works to encourage others to participate in these types of screenings.
1/16/12
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Secrets of the 401(k) Millionaires
The one characteristic that differentiates the winners from the non-winners here is contribution rate—a high percentage of those million-dollar savers had constant participation and high contribution rates, reports the Wall Street Journal.
- Someone who earns $35,000, saves 12% to 13%—including a company match, gets an annual raise of 3.5%, and annual returns of 7% would save a $1 million.
1/16/12
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Older Generation Think Workers Moan Too Much About Work/Life Balance
Many retirees believe that the young workers of today moan too much about their work/life balance, indicating they believe they already have enough employee benefits, reports Thomsons Online Benefits, citing a study by global insurance firm Aviva.
- Research from Aviva revealed that 67% of people who have left work are of the view that the new crop of workers complain about their work/life balance too much. Furthermore, 86% of retirees believe they could do a better job if they were in the roles of today's younger workers.
1/13/12
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5% of Patients Account for Half of U.S. Health Care Spending
Just 1% of Americans accounted for 22% of health care costs, which was about $90,000 per person, reports USA Today, citing the latest government data. Just 5% accounted for 50% of health care costs, about $36,000 each.
- Among patients in the top 10% of health care spenders, 60% were women and 40% were age 65 or older.
1/13/12
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Employees Angle for Higher Raises
The average increase in base salary is expected to be just 3% in 2012, up only a hair from last year's 2.9%, according to human resources consulting firm Mercer, reports CNNMoney.com.
Still, managers are concerned about retaining top talent, which explains why the best performers will see a brighter 4.6% on average.
- Most companies planned for 2012 salaries by the end of 2011, but finalizing the budget seeps into January and February.
(To learn more, see the SHRM Online article "Compensation Planning 2012: Proceed with Caution.")
1/12/12
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Fee Disclosure Deadlines May Be Delayed
Sources at the Department of Labor (DOL) have indicated, off the record, that the department might once again push back an April 1 deadline for retirement plan service providers to disclose detailed fee information to plan sponsors, which in turn would push pack the May 31 deadline for plan sponsors to disclose this information to plan participants, reports AOL Daily Finance.
The final version of the service provider disclosure rule is not scheduled to be published until the end of January. DOL insiders say that service providers need to have enough time to prepare before complying with the rules.
(Reuters also reports that the April 1 deadline that 401(k) plan providers were given to comply with new rules about fee disclosures may be delayed.)
- Separately, brokerage firms protest that requiring them to report how much they are paid to distribute mutual funds through 401(k) plan brokerage windows will be onerous because they offer thousands of mutual funds from hundreds of companies and often have different fee structures for each one, reports Reuters. The information will not benefit plan sponsors because of the sheer volume, according to the protesting firms.
(To learn more, see the SHRM Online articles "Preparing for Service Provider Fee Disclosures" and "In 2012, 401(k) Disclosures Will Shine a Light on Fees.")
1/12/12
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Health FSA Dollar Limit for 2013 Impacts Some Fiscal Year Plans Now
The Patient Protection and Affordable Care Act limits salary deferrals that may be made under a health flexible spending account (FSA) to $2,500 in “taxable years” beginning on or after Jan. 1, 2013. However Section 125 cafeteria plans that include health FSAs subject to the dollar limit, and that follow a fiscal rather than calendar plan year, need to take steps now to apply the dollar limit over their 2012–2013 plan year, reports the website E is for ERISA.
- For the plan year beginning April 1, 2012 and ending March 31, 2013, participants deferring the maximum amount would be limited in the amount they could deferring over the period April through December 2012.
1/11/12
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Communicating Value of Roth 401(k)s
While there are many reasons why the Roth 401(k) may be an attractive option for higher-income employees, what has surprised many are the benefits it offers participants across the income spectrum, making it advantageous for a wide range of employees and plans, according to a commentary by Vanguard Investments.
While the percentage of Vanguard-recordkept plans having adopted the Roth option is near 50% after only six years in existence, an important challenge for sponsors and investment providers is encouraging more participants to consider this option. Participant adoption in Vanguard plans that offer the Roth has risen much more gradually to only 9% by year-end 2010.
- "The key issue facing sponsors and providers is the need to communicate the feature effectively," according to Vanguard.
(To learn more, see the SHRM Online article "The Roth 401(k): A 'Value Add' for Your Employees.")
1/10/12
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Insurance Bought in the Workplace Can Have Drawbacks
Many people assume insurance offered by their employer is a better deal than they can get on their own. But while the premiums can be lower, such policies have drawbacks, reports the Wall Street Journal.
Premiums from new sales of life, disability, supplemental-medical and other types of insurance sold through work sites totaled an estimated $5.4 billion in 2011, up from $2 billion in 1997. But whereas traditional insurance is subject to state laws and disputes can be tried before juries, with the potential for punitive damage awards, policies sold through employers typically fall under the Employee Retirement Income Security Act (ERISA)—with a federal judge ruling on disputes and no damages allowed.
- In disputes over traditional policies, judges often interpret ambiguities in policy language in consumers' favor on the basis that the insurer wrote the contract, experts say. With ERISA-governed policies, insurers often have discretion to interpret policy language, and a judge can overrule a coverage decision only if the insurer has advanced an illogical policy interpretation or acted in an "arbitrary and capricious" manner
1/9/12
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New Regulation Targets Hidden Fees in 401(k) Plans
If you are a 401(k) plan sponsor, by April 1 each service provider must supply you with a revised service agreement that includes a complete description of the services they provide, a full disclosure of the costs of each service, a disclosure of any direct or indirect compensation they receive from associated providers, information on whether they assume fiduciary responsibility for each function and any potential conflicts of interest and how they are managed and mitigated, reports the Washington Post.
- By May 31, according to another new regulation, the same information must be shared with plan participants.
(To learn more, see the SHRM Online articles "Preparing for Service Provider Fee Disclosures" and "In 2012, 401(k) Disclosures Will Shine a Light on Fees.")
1/6/12
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However, DOL May Again Delay 401(k) Fee Disclosure
The Department of Labor (DOL) may push back the April 1 deadline that 401(k) plan providers were given to comply with new rules about fee disclosures, according to several people who had spoken to officials at the department, reports Reuters.
For 401(k) plan sponsors and participants, the delay could mean waiting at least three more months to find out what they are paying for their plans. A comment letter by the Securities Industry and Financial Markets Association requested a 12-to-18-month extension on the deadline from when the service provider rule finalized, which is expected by the end of January. Separately, the ASPPA and the Council of Independent 401(k) Recordkeepers asked for at least 12 months after the rule is finalized to comply with it.
- But sources familiar with the discussions at the DOL said providers should not expect a long delay on the deadline to comply with fee disclosures. "The (department) is definitely flexible, but they do want it to happen this year," one person who had spoken to DOL officials told Reuters.
1/6/12
Workplaces Ban Not Only Smoking, But Smokers
An increasing number of employers won't hire applicants whose urine tests positive for nicotine use, whether cigarettes, smokeless tobacco or even patches, reports USA Today.
Each year, smoking or exposure to secondhand smoke causes 443,000 premature deaths and costs the nation $193 billion in health bills and lost productivity, according to the Centers for Disease Control and Prevention.
- After several companies adopted smoker-hiring bans a couple of decades ago, 29 states and the District of Columbia passed smoker-protection laws, leaving and 21 states with no rules against nicotine-free hiring.
1/6/12