The HR Cafe

Phased retirement: It's happening, but companies aren't planning for it

Email Address

Close

One of the biggest shifts in the workplace is happening right now. And it’s workers themselves who are making it happen – not lawmakers, regulators or expensive consultants. As aging boomers approach retirement with their next eggs considerably compromised, they’re redefining the whole concept of retirement. Instead of the party and the gold watch, they want to stay on the job, but cut back on their hours and set their own schedules.

It’s often a win-win, of course. Older employees can maintain their standard of living, while employers gain the benefit of their experience and skills without having to carry a full-time employee on the rolls. But because these arrangements are often ad hoc, few organizations have taken a strategic approach.

For example, a piece in the Dallas Morning News points out that part-time employment could negatively affect an employee’s benefits, including life insurance and long-term disability insurance; pension calculations, which consider average salary over the final years of one’s career; and social security benefits.

Out of my way, Gramps

There are broader strategic questions as well. Will younger workers see older workers who refuse to step aside at age 65 as an impediment to their own advancement? And how do you compensate formerly salaried workers who are now part time? Do you pay them by the hour? Are they eligible for overtime if they put in longer hours?

Perhaps most important, what role should “phased retirees” play in the organization? Do you use them like other part-timers, to fill in during slow times? Or is there a better use of their talent and experience – for example, should they have a formal role in mentoring and developing younger workers?

These workers can be a tremendous asset to their organizations. Now’s the time for HR to begin thinking about how to make the most of them.

Employee benefits: They’re long gone, but their 401(k) money isn’t

Email Address

Close

Dear HR Executive,

If your organization is like many others, you don’t like to hang on to the small balances in 401(k) accounts whose holders have left your employ.

In fact, you aren’t legally obliged to keep vested balances under $5,000. If you do, it can be expensive in terms of administrative cost.

Why is this an issue? You’d think that departing employees would have a plan for their 401(k) balances, but this isn’t always the case.

Static Assets

The evidence: Research from the Charles M. Schwab investment company indicates that 43% of 401(k) assets owned by people who left their jobs in the first three months of 2008 still hadn’t been moved a year later.

So what’s your duty to former employees who have left small balances in your 401(k) program that you want to clear out?

Under IRS rules, you have to inform them of their options – which include rolling the money into a new employer’s plan or an IRA, or taking a cash distribution. (The latter option isn’t terribly attractive, because it incurs an immediate 10% tax penalty and the distribution has to be reported as personal income.)

And the best way to inform them – the way that ensures your 401(k) will continue to pass muster with the IRS – has just changed.

New Notices

Recognizing legal changes over the past decade, the IRS has issued new model notices for departed employees who have either traditional 401(k) assets and/or so-called “Roth” – or post-tax – assets. There’s a different notice for each. (The IRS claims these new notices are also simpler.)

To be sure you’re in tax compliance, you may want to download the new notices from the IRS website.

Dave Clemens

Editor-in-Chief

HR Rapid Learning Center

Employee wellness: How to present it so your C-suite will love it

Email Address

Close

Dear HR Executive,

Thoughtful HR pros are committed to the concept of employee wellness, and have been for a long time.

But when it comes to selling wellness to the C-suite, you may have a battle on your hands – especially at a time of slow economic growth, when CEOs and CFOs are scrutinizing every expenditure with skepticism.

What’s the best way to close the wellness deal with these folks? You might want to consider a double-barreled approach: 

• A business case that links wellness to the concerns of the C-suite, and
• A wellness program for your organization that costs very little.

The business case
As part of the business case, you could use ROI, or return on investment. Studies estimate that for every dollar spent on wellness, employers reap $1.50-$5 through lower insurance costs, reduced absenteeism, etc.

These are impressive numbers.  But unfortunately, many of them come from wellness providers who can hardly be seen as objective sources. And although various ROI calculators are available, it’s tough to be sure what your ROI would be on a new or improved wellness plan.

Competitive edge

Another way to make the case for wellness comes from Don Powell, a Michigan-based consultant.

Here's his argument: Companies find it hard these days to carve out a competitive edge. They’ve wrung most of the advantages out of training, equipment and capital. But companies can still differentiate themselves through employee health.

Healthy workers make better decisions, work harder and have more endurance. Maintaining and improving employee health is tantamount to raising the quality of the goods and/or services you produce, Powell says. 

Once you’ve made the business case, it’s time for the clincher: You can bring these benefits home at very low cost. Here are four affordable elements you can incorporate into a wellness plan:

1. Get them walking
It’s great to give people incentives to work out at a gym or engage in some other intensive form of exercise. The fact is, however, that some employees will never be “gym rats.” 

But everyone is a walker. Nudging folks to walk more than to and from their cars will affect conditions like obesity and hypertension. You could:

• Post maps of walking trails near your facility. These needn’t be wooded or scenic – they can loop through residential or commercial areas, and
• Organize competitions to see which department or team can post the best weekly or monthly mileages.

2. Promote Good Eating
Employees who eat unrefined foods, whole grains, and fruits and vegetables will have more vitality and find it easier to keep weight off. To encourage people to eat right, you could:

• Promote membership in whole food co-ops and sustainable producers like consumer supported agriculture (CSA) farms. Discuss group discounts with these organizations, and
• Set up lunchtime “tastings” where people bring favorite healthy recipes. Give the winners small prizes.

3. Encourage de-stressing
High stress correlates with problems ranging from suppressed immune systems to heart disease. To help employees bust stress, you could:

• Organize regular “stress breaks” where employees can stretch and bend away from their desks, and
• Get a teacher of yoga or other meditation/relaxation techniques to come in once a week.

4. Check Up
Whatever wellness steps you take, it’s important to verify that people are indeed benefiting. You want something to show your top management. Plus, employees who see demonstrated health improvement are motivated to continue. 

So before people begin, get a doctor to record their baseline weight, blood pressure and pulse rate at rest. Check the indicators periodically and reward those who’ve shown improvement. For the C-suite, you could also track absenteeism and medical claims.

But watch out...
Wellness programs tend to fail if they ask employees to make major changes in their lifestyle.

Whatever you do, it’s best to take behaviors employees already engage in, and tweak them in a healthier direction.

Dave Clemens

Editor-in-Chief

HR Rapid Learning Center

Aging workforce: A strategy for improving employee productivity

Email Address

Close

Dear HR Executive,

Is your workforce getting older? Not surprising if it is. Lots of data shows that more employees are likely to work into what used to be considered retirement age.

To improve the productivity of an aging workforce Michael Silverstein, professor of occupational health at the University of Washington, suggest you target four key areas:

Work environment.  Consider tools from ergonomics and universal design – like bright task lighting, contrast controls on visual displays, nonskid surfaces, etc. – to improve the safety and efficiency of older workers.

Health promotion and disease prevention.  This is about more than reducing health care costs. It’s about encouraging older workers to do the things they specifically need to stay healthy and productive – like making sure to get flu shots, and regular vision and hearing exams.

Work-life balance within the organization.  Arrangements ranging from job-sharing to telecommuting to phased retirement fall into this category.

Work-life balance outside the organization.  Don’t forget the social support mechanisms in the community that older workers may want to take advantage of, such as public transportation or senior recreation services. You may want to help them leverage these services through focused employee benefits.

You may not be in a position to attack all four of these targets at once. But the more you achieve in at least one or two areas for improving employee productivity, the more your organization will benefit from your older employees’ skills and efforts.

Dave Clemens
Editor-in-Chief
The HR Café Newsletter

The blues may be sapping employee productivity more than you imagine

Email Address

Close

Dear HR Executive,

Would you believe a quarter of your employees are depressed – putting your company at risk of lost employee productivity in at least four different ways?

That’s a shocking figure, but it’s what researchers at the Integrated Benefits Institute (IBI) claim. Working with data from the World Health Organization’s (WHO) Health and Work Performance questionnaire, IBI found that 28% of employees self-report as depressed.

Stark comparison
This compares with just 10% of the working population if you use only data from medical and disability claims.

True, most employees aren’t doctors, and their depression diagnosis might not agree with that of a medical professional. But the 28% figure does suggest that depression may be a much bigger roadblock for employee productivity than you knew.

IBI also estimated that of lost productivity associated with depression – whose money value has been put at $44 billion a year – 64% comes from presenteeism: employees who are at work but not performing adequately. Another 18% comes from sick days taken because of depression.

The other 18% is associated with short-term disability claims – 5% from STD claims with a diagnosis of depression and 13% from employees who go on STD and then get depressed.

Early treatment
What can HR and Benefits pros do to increase employee productivity? At least three things:

• Promote the idea that “real men” (and women) don’t suffer in silence with depression. WHO says it takes, on average, eight years from the onset of depression until it’s first treated. That’s too long, and productivity can suffer throughout.

• Make sure your health insurance plan covers mental health treatment.

• Consider some kind of Employee Assistance Program (EAP).

Dave Clemens
Editor-in-Chief
The HR Café Newsletter

Employer health care costs: Eligibility audits save money ... but beware the backlash

Email Address

Close

Dear HR Executive,

What do you – and your employees – hear when somebody says “health plan eligibility audit”?

It’s the latest hot trend being pushed at employers – largely by those who do the audits – as a way of restraining employee health care costs.

Essentially, in an audit you go over your plan rolls with a microscope, looking for employee dependents who shouldn’t be on there. Or if you’re a bigger company, you pay somebody to come in and do it.

Health care costs reduced as promised
Advocates, such as Mercer Consulting, claim that employer health care costs are reduced by $1,900 each time they find one dependent who’s covered but shouldn’t be. Other audit consultants claim that companies find between 5% and 12% of those enrolled fall into this category.

Experts say it’s relatively rare to find outright fraud.

Most times, either the employee didn’t understand the terms of coverage, or the situation of the dependent has changed so that he or she is now ineligible.

That’s often the case with 20-somethings who were covered while in their teens, but now either aren’t in school or have recently graduated. (Note: Some states now require health plans to continue covering these young folks through their late 20s.) Or with ex-spouses who are no longer entitled to coverage but are still on the plan.

Sometimes it’ll be a case of dependents whose ties to the insured employee aren’t close enough to qualify for coverage – like that sickly uncle who lives with the family, or even stepchildren, who may not be eligible under some plans.

Rules are rules
Well and good. Rules are rules, and if you can save meaningful bucks by making sure they’re adhered to, why shouldn’t you?

The problem is simply this: Is the money you’re going to save worth the potential alarm, discontent and resentment that employees may feel, knowing they’re being “audited” – something they will likely interpret as a reduction in their benefits?

After all, you’re probably already concerned about employee motivation and engagement at a tough time like this. Do you want to do something that will loosen the strings of commitment that tie people to the organization?

Clearly not.

What’s in it for them?
That’s why if you’re going to do a full-fledged health plan eligibility audit – or just go poking around yourself for ineligible dependents – it’s a good idea to link it with this powerful idea: Any health care costs you save will either help you avoid premium hikes to employees in the future, or reduce their severity.

This isn’t just blarney: According to consultants Watson Wyatt, companies that have done eligibility audits over the past three years say they’re less likely to raise employee co-pays or premium contributions, or place further restrictions on eligibility.

So sure, make certain you’re not insuring people you shouldn’t be – but let employees know what’s in it for them.

Dave Clemens
Editor-in-Chief
The HR Café Newsletter

Health insurance costs skyrocket: Do we detect a credibility gap?

Email Address

Close

Dear HR Executive:

The ink is barely dry on the insurance industry’s highly public pledge to trim health insurance costs – or, to be accurate, their nonbinding pledge to work really hard to trim the rate at which health insurance costs will go up.

But maybe insurance companies didn’t get the memo.

As we reported, the industry says it wants to help the Obama Administration reduce the growth rate of health spending from 6.2% to under 5%.

Looks like they’re gonna miss that target:

• Rhode Island's top two health insurance companies, for example, just filed rate requests for next year.  Blue Cross & Blue Shield of Rhode Island is proposing a 16.3% hike. United HealthCare of New England wants to raise its large-group rate by 11.6%.
• Hawaii’s Medical Service Association is asking for a small group rate increase of 12.7%.
• Oregon's largest health insurer just won a 14.7% rate increase on individual and small group plans, after raising its rates 26 percent a year ago.
• In Pennsylvania, Independence Blue Cross wants a 52% boost in nongroup rates.
• Blue Cross Blue Shield of Michigan is asking for a staggering rate hike of 56% on some individual plans.

And here’s the curious thing. Utilization of medical services is flat.

In a new study, researchers at the actuarial firm Milliman found that consumption of medical services is expected to be flat this year for the first time ever.  Even so, total medical costs for a typical family of four in 2009 are expected to go up 7.4% this year, to $16,771. Employers will pay $9,947 of that, and employees will contribute $4,004 through health plan premiums and another $2,820 through out-of-pocket costs such as co-payments and deductibles.

Kate Fitch, a consultant at Milliman, attributed the consumption slowdown to better disease management and wellness programs. However, per-unit medical costs are up.

Still, that’s "only" a 7.4% increase in underlying costs. So why the big jump in premiums?

Health insurance administrative costs have been rising faster than inflation. So that’s part of it. But mostly it’s about the stock market.

When the market is strong, insurers earn a considerable portion of their income from investments. That helps keep health insurance costs in check. But when the markets tank, insurers have to make up the difference somehow.

That somehow is you.

So the rate requests we’re seeing today reflect a combination of higher medical costs, higher administrative costs, and the loss of investment income. That’s a triple whammy that leaves policyholders holding the bag.

If the stock market continues to improve, the climate could change. Insurers will be looking for more cash to invest, so they’ll get more aggressive to win your business. That could finally bring some relief.

Unfortunately, it won’t be any time soon. The rates they’re looking to lock in now will be around for a while.

Michael Boyette
Editor, HR Café Training Center

Employee Health Insurance Costs: Providers, insurers pledge $2 trillion in cost savings … sort of

Email Address

Close

Dear HR Executive:

Back in January, we suggested that health insurers and providers, feeling threatened by the prospect of a public health plan, might start to moderate employee health insurance costs.

Sure enough, industry leaders are now pledging $2 trillion in cost reductions over 10 years. So what will that mean for your benefits costs?

It means they’ll be going up.

Because the industry isn’t really pledging to cut employee health insurance costs – only to reduce the rate at which those costs will go up. Currently, health spending is projected to rise by 6.2% a year for the next decade. The “voluntary effort” aims to reduce that growth rate by 1.5%.

Even that modest goal has left many experts dubious -- including the President’s own budget director, Peter Orzsag. He welcomed the health care industry’s participation in the reform effort. But he pointed out that while they may have signed the pledge card, they’re a long way from sending a check.

So far, the pledge is short on specifics. Industry groups say they’ll offer more details by June on how they will cut employee health insurance costs. They will almost certainly be promoting electronic medical records – which can help reduce duplication of care and unnecessary testing. And they will embrace comparative effectiveness research, which will help identify the most effective (and cost-effective) treatments. But these are long-range efforts, and you won’t see any impact on your benefits costs anytime soon.

Still, with the threat of a government-sponsored health plan still lurking in the wings, insurers and providers are worried about their public image. It might be a good time for to reach out to your health plans and see what they’re prepared to do right now to help you rein in costs.

Michael Boyette
Editor, HR Café Training Center

Some fringe benefits with a decidedly green tinge

Email Address

Close

Dear HR Executive:

Here’s some out-of-the-box thinking about fringe benefits.

The city of Austin, Texas, has bought 15 bicycles for employees to use for business needs or during lunch. The move is intended to help reduce use of cars in the city and thereby reduce Austin's carbon emissions. The city spent $3,840 -- $256 apiece -- for the bikes and will provide helmets and locks, city spokeswoman Charlotte Blum said.

The city is also partnering with Daimler, which is providing 200 fuel-efficient Smart cars in a car-sharing program for employees.

Bikes and Smart Cars aren’t for everyone, of course. But when you think about what people spend on getting from Point A to Point B, there’s an opportunity for innovative companies to come up with ideas that have a big impact on workers’ lives. For example, I once worked for an organization that allowed employees to use its pickup truck on weekends – first come, first served. It was a nice perk – and the cost to the organization was minimal. Transit subsidies like TransitChek are another low-cost, yet highly visible, benefit.

And if, like the City of Austin, you can reduce your organization’s carbon footprint at the same time, you’ve got some great fringe benefits that deliver a lot of bang for the buck.

Michael Boyette
Editor, HR Café Training Center

Healthcare coverage: The hidden cost of rising premiums

Email Address

Close

Dear HR Executive,

Nobody can blame you if you ask employees to assume a larger portion of their healthcare coverage as costs continue to rise.

But have you considered the hidden impact of this seemingly straightforward business decision?

Startling stats
A recent study by the Commonwealth Fund threw out some startling statistics about the effect of healthcare coverage costs on U.S. households – and this may lead you to different conclusions about asking employees to pony up more.

Here's what the study found:

• 41% of working-age adults had trouble paying medical bills in 2007, up from 34% in 2006.
• Of those struggling with medical bills, 39% used up all their savings paying them. Some 30% took on credit debt to do so, and 29% were at some point unable to pay for food, heat, or rent.

• And, significantly, 61% of those with problems paying bills or significant medical debt were insured at the time the care was provided.

Dire straits
Think about the effect on your employees if they're among those in such dire straits over the cost of healthcare coverage.

They may:

• Suffer financial stress that affects their sleep and drains their daytime energy.
• Be forced to take second or third jobs, potentially affecting the quality of the work they do for you, their main employer.
• Forgo filling prescriptions and other health-related expenses, leaving them vulnerable to medical conditions that hamper their productivity.

Rethinking healthcare coverage
Nobody knows what's best for your business better than you. Next time you're hit with a health insurance premium hike, you may feel you have no choice but to ask employees to pay a bigger share of the cost.

But before you take such measures, it may be worthwhile to consider the hidden costs spotlighted by the study. You may be able to find ways to revamp your plan design so as to make co-pays and deductibles for the worst productivity-sapping conditions more affordable.

Dave Clemens
Editor-in-Chief
The HR Cafe Newsletter