Tip of the Day: Legal considerations for furloughs

I received this week from Mercer citing alternatives to layoffs, furloughs and suspending 401(k) matches, while still cutting costs. About halfway through, I saw this nugget:

"...furloughs may prompt scrutiny from the Department of Labor since U.S. labor laws prevent employers from requiring salaried employees to reduce the number of weekly hours worked like they can do with hourly employees."

You may already know that, but it was news to me. And even if you knew, it never hurts to be reminded, right?

At any rate, Mercer also offered some alternative approaches to traditional cost-cutting measures without harming your employment brand or diminishing your resources of talent:

"These solutions involve cutting pay in exchange for enhanced paid-time-off banks and offering leaves of absence in monthly increments at reduced pay levels. Instituted as either a voluntary or involuntary measure, these alternative approaches cut workforces in the short-term while maintaining employment of critical talent over the long-term. The benefits are numerous – availability of essential employees once business improves, option to restore salaries and paid time-off to original levels, strong employee morale and additional cost-savings by not having to rehire workers."

Tip of the Day: Help cure 'Mattressitis'

A rarely talked about but common condition, "mattressitis" is the "urge to withdraw assets intended for retirement and hide them under one's mattress."

As the economy has worsended, so has the condition among U.S. workers. To help employers combat mattressitis, Mercer has launched a new website, FeelBetterAboutRetirement.com.

“Planning for retirement in a volatile and rapidly changing economic environment can be a major challenge, which is why we are proactively addressing our participants’ anxieties with this interactive educational program,” says Suzanne Nolan, director of marketing and communications for Mercer’s outsourcing business. “By candidly addressing the challenges that participants can particularly relate to in this economy, we feel that we can improve employee engagement and empower employees to make decisions that are consistent with their financial goals.”

The initiative is based on key findings from the 2008 Mercer Workplace Survey, which found 43% of participants lack confidence in their ability to calculate and plan for how much money they may need in retirement.

“While plan sponsors can feel encouraged by the fact that employees still consider saving for retirement a priority, our findings emphasize the need to increase communication to participants about the benefits of maintaining a long-term investment strategy," Nolan says. "Employees consistently report that they rely on employers and their plan administrators more than any other source for information about investing for retirement, and we will continue to support plan sponsors in fulfilling that critical role.”

Tip of the Day: 'Look before you leap'

As the recession drags on, more employers are reducing or eliminating their matching 401(k) contributions. A new report from Mercer, "Suspending the 401(k) match – Look before you leap," cautions employers to have a full understanding of the implications and potential pitfalls of taking this step.

“Distressed organizations may feel they lack sufficient time or resources to carefully consider the impact of contribution reductions or to evaluate alternative approaches. But the effort invested up front could save considerable time and expense later in dealing with unintended consequences,” says Bill McClain, Mercer retirement consultant.

“While the loss of one year’s employer contribution won’t have a huge impact on an employee’s retirement benefit, it could represent yet another incremental loss to an already-weakened benefit,” McClain observes. “Suspending contributions also results in a lost opportunity to purchase equities at historically low prices. These implications need to be weighed against the organization’s need to preserve capital.”

Companies should not lose sight of their longer-term business objectives, Mercer warns. “Many organizations will be better off identifying cost saving that will have only a minimal impact on those groups of employees that will be the most critical to helping them move forward once the economy improves.”

In addition, the regulatory implications of a match reduction or suspension can vary greatly from plan to plan. Employers maintaining an IRS safe harbor design are subject to specific rules or even restrictions on suspending or reducing contributions during the plan year. Other plan designs may offer more flexibility in terms of changing employer contributions, but even these plans must satisfy various regulatory requirements.

In particular, employers need to understand whether a plan amendment is required and whether that amendment raises any anti-cutback issues.

Plan sponsors should determine whether language in past employee communications could be interpreted as a promise to provide ongoing contributions. Organizations with collectively bargained or other employment agreements in place may be prevented from making company-wide changes to DC contributions.

Tip of the Day: Remember there's strength in numbers

Think your company would benefit from an onsite clinic but can't afford the investment? Trying getting by with a little help from your friends, so to speak.

In a "Five Minutes With ..." podcast this month, Associate Editor Lydell Bridgeford interviews Dr. Bruce Hochstadt, who leads Mercer's worksite clinic consulting group. Hochstadt lets listeners in on new trends in onsite and near-site health clinics, including the growing number of employers banding together to share one clinic to serve all employee populations. Read the accompanying article, “All together, one: Economic woes unite worksite health clinics,” in EBN April 1.

News You Can Use: Pension funding remains low

As another cringe-worthy sign of the times, a new Mercer data on Fortune 1500 companies show pension plan funded status at the end of Jan was unchanged from Dec., indicating funded status of plans sponsored by the largest U.S. companies remained at 75%.

Don’t hold your breath; it gets worse.

The value of both pension assets and liabilities declined in Jan, reducing the dollar amount of the estimated aggregate deficit to $380 billion from $409 billion at the end of Dec.

A Watson Wyatt survey also released today examined the pension problem over the course of 2008, finding that pension plan funding at the largest U.S. companies had reached historical lows at the end of the year.

Watson Wyatt measured the aggregate data of 450 Fortune 1000 companies, forecasting an average decline of 32% (106% in 2007 to 74% in 2008). This translates to a $445 billion total loss, annihilating a $78 billion surplus in 2007 and leaving these companies with $366 billion deficit to clean up.

Perhaps the only good news is for DC plan sponsors, and only in a misery-loves-company kind of way. --Kathleen Koster

Tip of the Day: Follow seven steps to merger success

Among February's "Five Minutes With ..." podcasts is Managing Editor Leah Shepherd’s interview with Len Gray, the head of the America’s M&A consulting business at Mercer. After you read our report on merger musts in this month's EBN, listen to Gray as he offers further tips for handling benefits during a merger or acquisition.

News You Can Use: When it comes to wellness, employees say out of site, out of mind

I have a treadmill in my home, and it's a good thing I do. Otherwise, I likely would not exercise. I have the same attitude toward health care; I prefer to go to retail clinics because I don't need an appointment and their hours fit my schedule. Convenience is king. Apparently, I'm in good company, and employers are noticing.

A recent Mercer survey finds that employers who offer primary care services at an onsite clinic can control health-care costs by providing a lower-cost option and to improve productivity by reducing time lost for workers to receive care offsite. Some 31% of large employers offer occupational health clinics, 14% offer a clinic to provide primary care and 10% are considering adding a primary care clinic this year.

Of course, the inevitable response is: Well sure, we'd love to have an onsite clinic but they're too expensive. However, according to Mercer, some employers have found sharing clinic services to be a workable, cost-saving solution. The survey finds 11% of respondents currently share their clinic with another employers and 13% would consider sharing.

And relating back to my 'convenience is king' argument, Mercer finds that 86% of employers cite “convenience (in terms of time and effort) for their employees” as an important or very important objective in offering an onsite clinic. Among other reasons:
* 77%, better access to preventive care.
* 75%, encouraging employees to make better use of health/wellness programs.
* 74%, control of overall health spend.

For more from EBN on onsite health, click here.

Tip of the day: Get a grip on absenteeism reasons, costs

It seems keeping a handle on who's out when for what is the "Who's on First?" of benefits management. A survey from Mercer finds that total cost of absence can equal as much as 36% of payroll. Of that figure, 9% accounts for unplanned absences. Planned absences, like vacations and holidays, average 26.6%. For a mid-size business, this unplanned absence can account for as much as $4.5 million dollars per year, reports Mercer.

"Employers tend to focus their energies on managing health care costs because the dollars are easily measured," says George Faulkner, principal and absence management specialist at Mercer. "But this new survey suggests that absences cost employers more than half the cost of health care, a startling number and a call to action for all organizations to get a better handle on this often unchecked cost," he adds.

Click here for EBN coverage on quantifying and reducing absenteesim costs, particularly FMLA absences.

News You Can Use: Retirement plan sponsors consider new strategies

In response to the recession, employers are considering changes to their retirement plan strategies, according to a new Mercer survey, "Leading Through Unprecedented Times."

Among the possible shifts, 17% of retirement plan sponsors are considering doing suspending their 401(k) match, 77% plan to review investment and administrative fees, 85% will likely enhance employee education and communication and 75% will revisit fund lineups.

On the defined benefit side, 46% of respondents plan to change investment strategies to reduce risk, although 31% expect to change their funding policies and 24% may reduce or halt accruals.

News You Can Use (but don't want to hear): Pensions at largest companies post record losses

This past Thanksgiving, it seems DB plan sponsors were just thankful to get through November. New analysis from Mercer shows that pension plans sponsored by the largest U.S. companies suffered their second consecutive month of record losses, with their funded status falling by more than $130 billion in November.

This adds to losses of $110 billion in October and $100 billion in the first three quarters of 2008, turning a surplus of $60 billion at the end of 2007 into a deficit of $280 billion at the end of November.

The study covered plans sponsored by companies in the S&P 1500, and showed the aggregate funded status fell from 104% at the end of 2007 to 97% at the end of September, and dropped further to 80% at the end of November. Mercer’s analysis also shows that without a significant increase in high-quality corporate bond yields -- used by most companies to measure the value of plan liabilities -- the losses would have been worse.

News You Can Use: Average deductible tops $1,000

New survey results from Mercer reveal that for the first time this year, employees' average annual deductible for single coverage topped $1,000 -- a troubling sign for employers and workers alike who are struggling to pay for health care.

The average single person must now pay $1,001 in out of pocket expenses before coverage kicks in, a 17% increase from last year's average $859.

"Raising the deductible has become the fallback for employers faced with cost increases they can't handle," Mercer consultant Laura Baker told the LA Times. "It's the easiest way to reduce cost without taking more out of every employee's paycheck."

Michelle Dimarob, legislative affairs manager for the National Federal of Independent Businesses, added: "This is very reflective of the tough economic times we're in. Health care is truly a pocketbook issue for both employers and employees."

News You Can Use: Number of expats doubles

The economy hasn't soured employers on expatriate assignments, as new research from Mercer finds that the number of that the number of employees working abroad has nearly doubled in the last several years -- from 50,000 in 2005-2006 to 94,000 today.

Benefits factored highly in employers' expat plans, as 86% of respondents consider benefits provisions for expatriates as a medium or high priority. However, strategy appears to be lacking, as 26% have no overarching policy for providing expatriate benefits and 64% report no specific procedures in place to measure the success of their expatriate benefit programs.

Among specific benefits for expats:
* 32% of companies offer international plans (a nearly 10% increase from 2005)
* More than 80% do not consider the local social security provision when providing medical benefits for expatriates.
* 86% cover expat death benefits.
* 78% provide long-term disability benefits.

With such significant investments going into expatriate assignments, coupled with the unforgiving economy, selecting the right employees for expat assignments is crucial. Read the current EBN for tips on conducting "expat profiling," and listen to a "Five Minutes With..." podcast with expat expert Steve Watson on what employers should be looking for in expat candidates.

News You Can Use: Buck, Mercer disagree on 2009 premium raises

Two studies on the same topic from consulting groups Buck and Mercer have benefit managers scratching their heads.

Mercer says premium raises will be the lowest in a decade, around 5.7%, while Buck predicts double-digit increases yet again, somewhere in the range of 10-11%.

We'll see how this one shakes out, but in the meantime, let's prepare for the worst and hope for the best!