Archive | At Work

Reporting value of employer-provided health benefits on W-2 effective January 2012 … Is taxation of health benefits far behind?

30 Nov

Starting in 2012 employers will be required to report the  cost of employer-provided health care benefits in box 12 of your form W-2.  The amount will use code “DD”.

The amount shown on the W-2 is for information purposes and is not taxable . .  . for now.  However, do not lose site of the fact that the tax-free status of health benefits is the single largest revenue loser for the federal government.  The Simpson-Bowles Commission recommended a gradual phase out of this tax break.

Employer Provided Health Care Insurance: Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax (on high cost plans) reduced to 12%.

Given the failure of the super committee of Congress to accomplish anything, this employee tax benefit is a prime target for dealing with the federal deficit.  A change is unlikely to come all at once and it may be income sensitive, but it is hard to see how this plum will be left on the tree for much longer.

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Teachers are underpaid, teachers are overpaid, what’s your perspective?

16 Nov

Are teachers underpaid, overpaid or is their bowl of porridge just right?  Take a position and I can find you statistics to support it. The fact is you can’t realistically find other jobs fully comparable to a classroom teacher. After all, what job in industry has to put up with a parent who thinks her C student belongs in an AP course? What other job virtually requires you to buy your own supplies?

People don’t go into teaching to get rich and people wouldn’t keep going into teaching if they were not adequately compensated; that’s total compensation, not just pay. I’d like a job with eight weeks off in the summer, snow days, and a week off here and there during the year. I wouldn’t like a job managing a few dozen kids for hours on end or reading a couple of hundred eighth grader’s attempts at prose while watching Desperate Housewives.

Is a pension better than a 401(k) plan, you betcha. Is paying little or nothing for health insurance better than paying 25-30% of the premium, again affirmative. Is individual job security through tenure better than employment at will, it kinda is. Are government backed health benefits in retirement at any age retirement is permitted better than “you are on your own” before age 65, I’m guessing it is.

Let’s run some numbers. Say you are a teacher earning $60,000 a year. You work 180 days a year or a total of 1440 hours. That means you earn $41.66 an hour (yes I know, you actually work more hours, but so do people in the private sector if they want to keep their job and advance). Now let’s look at a training manager in a large company also earning $60,000. She works 264 days a year less 10 days vacation and say 8 holidays. That’s a total of 1968 hours meaning she earns $30.48 an hour or 36.6% less than the teacher. Or to put it another way, the corporate trainer would need base pay of $81,960 to be even with the teacher plus about an additional 15-20% to be even in total compensation and benefits.

Now look at the reality of pensions. It’s true most teachers pay a significant portion of their pension. However, that is comparable to the 6% to 8% of pay private sector workers must contribute to get a full employer match on a 401(k) plan.  A teacher earning $60,000 likely will have a pension of 70% of pay at full retirement age. To equal that pension initially, the worker with a 401(k) plan needs about $585,000 (to buy an annuity) and that does not provide a survivor benefit or inflation adjustment.  The typical teacher pension provides both. Many teachers also have a 403b plan to supplement their pensions.

But you know what, none of the above matters. What matters is what is affordable to the people footing the bill. In the private sector that is the business owner or shareholders. In the public sector it is taxpayers. You can argue all you want about who is over or under paid, what job is unique or more valued than another, but what matters is the ability to pay for the expense that is created.

Public employees are clearly at a disadvantage because there are limits on public spending and taxing (or there should be) and that is the essence of the problem.  The debate and crisis we are seeing today is a result of politicians and union leaders forgetting that fact and now faced with high costs and tremendous long-term liabilities which fall squarely on the shoulders of taxpayers.

Making the argument that teachers, police officers and firefighters “deserve” more is quite irrelevant, as irrelevant as the AARP saying seniors earned their untouchable Social Security and Medicare benefits.  

The head of the NJ teachers union earns $250,000 a year, the President of the United States earns $400,000 and according to the Bureau of Labor Statistics latest data, the average salary of a registered nurse in the United States is $67,720. The average teacher salary varies widely by state, but appears to be around $55,000. In some higher income states it is $60,000 or more.

So, are teachers overpaid?  Pick your facts.

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The empty promise – “if you like the health benefits you have, you can keep them.” Annual enrollment for 2012 and the loss of grandfathering under the Patient Protection Affordable Care Act

17 Aug

Tell me it isn't' so

During the health care reform debate the point was repeatedly made that workers who liked their benefits would not lose them, they could keep the benefits they had. Somebody should have checked with employers first before making that promise.

While it is true that the Affordable Care Act does grandfather existing plans and thus exempts them from some requirements of the law, such as providing preventive services without deductibles or co-payments applied, there is a catch. Employers can maintain their grandfathered status only if they do not make changes to their plan.

Here are changes that will cause a plan to lose its grandfathered status:

Elimination of a Particular Benefit

Increase in Coinsurance

Increase in Deductible or Out-of-Pocket Maximum ((by more than medical inflation plus 15%, as measured from 3/23/10)

Increase in Copayment: (by more than greater of: (1) $5 (adjusted for medical inflation), or (2) medical inflation plus 15%, as measured from
3/23/10)

Decrease in Employer Contribution (if an employer decreases its contribution rate toward the cost of coverage by more than 5 percent below the contribution rate on March 23, 2010)

Changes in Annual Limits

- No Previous Limits: (if the plan imposes a new overall annual limit on the dollar value of benefits that did not exist before the law).
- Previous Lifetime Limits: (if there is new overall annual limit that is less than the value of an existing lifetime limit)
- Previous Annual Limits: (if the existing annual limit is decreased)

Here is the dilemma employer’s face; either they maintain grandfathering to avoid additional costs because of benefit mandates under the law or attempt to manage costs and make changes to the plan design and/or cost sharing. As we approach the 2011 open enrollment period, employees will quickly find out what decision employers have made. The choice is not hard.

 Making benefit changes such as raising deductibles or the percentage of premiums paid by the employee will save more money than the additional cost of the new mandates (at least until HHS expands the mandate). It’s the old give with one hand and take with the other. Nobody should be surprised at this outcome.

When the “promises” were made that you could keep the plan you like, the regulations had not been written that eventually mitigated the value of grandfathering, essentially making it impossible for employer and other plan sponsors to maintain the grandfathering status.

When you receive your open enrollment material to make benefit selections for 2012 do not be surprised if the plan you like has disappeared or changed substantially. You see, the “affordable” part of the Patient Protection Affordable Care Act is still missing.

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More money for the Early Retiree Reimbursement Program (ERRP) S.1088 – not likely.

1 Aug
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The Patient Protection and Affordable Care Act provided $5 billion to reimburse employers for a portion of the cost of early retiree health insurance coverage.  The idea was to help assure that with the enactment of PPACA employers did not drop this coverage for early retirees and perhaps drive more Americans to government subsidized coverage.   More than 5,400 plan sponsors had been accepted into ERRP as of March 17, 2011.  As of May, 2011 more than $2.4 billion had been distributed.  HHS stopped accepting ERRP applications on May 6 because of the expectation that payment to the enrolled employers would deplete the fund.

Hey, you voted for me.

Senator John Kerry (D-Mass.) has introduced the Retiree Health Coverage Protection Act (S. 1088). The legislation would add $5 billion to the Early Retiree Reinsurance Program (ERRP), bringing total funding up to $10 billion.  Senator Kerry believes additional funding “could be used to allow more employers to participate in the program and to further reduce the cost of the retiree health coverage.”

“Reduce the cost of the retiree health coverage?”  Reducing the cost of anything does not mean shifting the cost to someone else, in this case taxpayers or more accurately U.S. Treasury bondholders, at least not outside of Washington, DC.   This legislation will never become law, but it does provide an insight into the thinking of some (many) members of Congress.  In the midst of a fiscal crisis, a $14 trillion and growing deficit and out of control spending, a U.S. Senator proposes giving $5 billion to some of the largest corporations in the U.S. while many of these organizations are criticized over record earnings and hoarding cash and, by the way, regularly continue to cut retiree benefits. 

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What is the chance employers will drop health benefits in 2014?

28 Jun

McKinsey & Co is under attack because it released a survey indicating a significant number of employers will drop health benefit coverage for employees when the Affordable Care Act exchanges are available in 2014. The study’s conclusions are not consistent with administration or CBO projections (especially related cost projections).

Will employers make such a move, is it beyond their power or will?  Well, doubters should look at what employers have done in the past in the name of saving money and preserving earnings.

Is this what TR meant by a square deal?

Retiree health benefits have been capped or eliminated, retiree spousal coverage has been dropped, employees have been shifted into high deductible plans, pension plans frozen, 401k matches stopped and much more. In other words, when it comes to meeting shareholders expectations,  commitments to employees are an easy target and a low priority.

Consider the 100-year-old company with a pension plan in effect since 1911. Even during the great depression it maintained its pension plan trimming pay and pensions by 10% and reinstating both cuts after three years.  The twenty-first century is a different world. Employees of this company who still have the pension benefit are told their promised benefit will be frozen and future benefits will accrue under a new less generous formula. So, a 55-year-old trying to plan a future retirement suddenly finds the pension to be several thousand dollars a year less than expected.

According to the Employee Benefits Research Institute: EMPLOYMENT-BASED COVERAGE REMAINS DOMINANT SOURCE OF HEALTH COVERAGE, BUT CONTINUES TO ERODE: Employment-based health benefits remain the most common form of health coverage in the United States. In 2009, 59 percent of the nonelderly population had employment-based health benefits, down from 68.4 percent in 2000.

Legally of course there is no obligation for an employer to continue these benefits.   However, employers conveniently forget that future benefits are part of total compensation over an employees career.  Employees paid for these benefit promises through lower cash wages, a point employers have no trouble pointing out when promoting the value of the compensation package.

How is cutting the pension a worker ten years from retirement is counting on any different from telling an executive the stock options he received nine years ago as part of his total compensation now must be forfeited? Answer, one happens and one doesn’t. 

Employers have a right and obligation to manage costs and to assure that promises made can be kept.  Sometimes that means changing those obligations for new hires to begin a lower cost structure, it always means keeping a reasonable level of total compensation costs, but it should not mean changing the deal for long-term employees who have little time to adjust and had every reason to believe they could rely on that portion of their total compensation that was earned over ten, twenty or thirty years.

So, do you still think employers faced with ever escalating health insurance costs will pass up the opportunity to save thousands of dollars per employee by putting them in exchanges?

Let me also blow up the myth held by many economists and other experts that employers will feel any obligation to make up lost benefits with higher wages. Those savings have and will continue to go to the bottom line.

 

[Note: someone is going to say, ok, how is this any different from what the states are attempting to do to their workers, you support those changes.  Yes, I do because those benefits have been mismanaged and abused for decades, they are consistently well above the competitive market and unlike private employers, including in the example above, states have not attempted to manage their costs over the years and rather took little or no action until a crisis was born.]

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NLRB says employers have less time to express views on unionization…so what are they waiting for?

24 Jun

Quick, get the file, we have to talk to employees

Employers and their associations are bent out of shape over a new NLRB ruling that greatly shortens the time an employer has to respond to an organizing drive and make it’s case for employees not to unionize. Opponents say this political move by the NLRB ”eviscerates an employer’s legitimate opportunity to express its views about collective bargaining .”

Really now, and exactly what prevents an employer from making its case in deeds and actions every day it is in business? An employer that must go into defensive mode with enhanced communications upon learning of a unionization drive is…stupid.

An employer with a work environment that provides fair and competitive compensation, that treats workers with respect and consideration and continuously is open and honest in its communications has little need to be concerned there is too little time to respond to union efforts.

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Union leader makes strong argument against public sector collective bargaining

19 Jun

New Jersey Governor Christie with the help of some Democrats is ready to approve several changes in state worker benefits and pensions to help close a growing funding gap of tens of billions of dollars. Needless to say the unions are not pleased, but I think the following quote reported by Bloomberg.com is most telling, accurate and an excellent point for why collective bargaining is not appropriate in the public sector.

Union members hissed and booed as Sweeney, who is sponsoring the measure in the Senate, testified. “You’re not my brother,” one person yelled, a reference to his union position. The hearing was later delayed after state police led out two dozen union members who chanted “union rights are human rights” and “kill this bill” as Bob Master, political director for the Communications Workers of America, spoke against the measure.

“Real Democrats would have killed this bill,” Master said. His union represents about 40,000 state workers and is the largest union for New Jersey government employees. The organization has been pushing for any changes in its members’ health-care contributions to be done through collective bargaining, not legislation.

Call me cynical but in this case “real Democrats” and collective bargaining with the folks who financed their campaigns is what got NJ into this mess in the first place.  Now key Democrats are doing the right thing fixing the mess.  It’s about time the citizens of NJ and other states in a similar mess support the politicians trying to fix years of deals with the unions, underfunding of promises and overly generous benefits that are not affordable by  the citizens who are footing the bill. 

State workers deserve a fair and competitive total compensation package consistent with that of their fellow citizens, recognizing the jobs they do, the hours they work and the relative security of their positions, no more, no less.

Moran: Real leadership sang louder than N.J. unions’ tired refrains

More employers will drop health insurance following a trend in retirement benefits

9 Jun

If you are a regular reader you know I am a great believer in unintended consequences. You may also know that during the health care reform debate I said that the legislation was constructed in such a way that employers would be encouraged to drop their coverage, pay the fine and thereby shift employees to the exchanges even if it meant providing employees with an additional payment toward the premium. Given that most Americans would be entitled to a federal subsidy toward the cost of coverage this would result in more costs than projected for the federal government.

For many workers and their employers this is a win-win situation as it is for policymakers seeking more government control over the system (perhaps the intended consequences). It may not be such good news for the federal budget and assumed savings from health care reform.

A recently released study conducted in early 2011 by McKinsey and Co and reported in McKinsey Quarterly reports the following:

Overall, 30 percent of employers will definitely or probably stop offering ESI (employer subsidized insurance) in the years after 2014.

Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.

Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

One thing is very clear, the world of employee benefits is rapidly changing because of cost pressures and legislation. Pensions have all but disappeared, health benefits are dwindling and shifting costs to workers and even government workers are facing significant changes.

There are only two choices left; employees will be completely on their own for their security needs or there will be more government involvement. Neither is appealing for several reasons.

Employers may see short-term benefits, but in reality they are making a big mistake by losing control, risking higher taxes, creating a detached workforce more distracted by life’s security needs, and dealing with an employee base finding it more difficult to retire.

Employers planning cutbacks in retiree coverage in response to health care reform. Shifting retirees to Medicare Part D and to the insurance exchanges are part of the strategy

10 May

If you are thinking about retiring early, you must factor health benefits into your plans. There is a good chance your employer-provided benefits will not be there. Many employers have been looking for a way out of retiree medical and the Patient Protection Act gives it to them on a silver platter.

Several provision of PPACA provide a greater incentive for employers to eliminate or cut back on retiree coverage. The retiree drug subsidy designed to encourage employers to keep prescription benefits for age 65 and older retirees was made taxable to employers. The Early Retiree Reimbursement Program not only highlighted the concern of elimination of this benefit, but also the expiration of the fund will again cause employers to re-think this coverage. Also, the establishment of the health insurance exchanges in 2014 provides a safety net for early retirees thereby making it easier for employers to drop coverage and possibly provide a fixed dollar subsidy for this private coverage.

A new survey from AonHewitt relates where employers stand on these issues.

As for companies in the survey that pay a portion of health coverage for their retirees age 65 or older, three-quarters currently collect the Retiree Drug Subsidy (RDS).  Of those, 73 percent said they are altering their retiree drug benefits strategy, as health reform eliminates the RDS tax advantages for 2013, and creates enhancements to the Medicare Part D program for retiree drug benefits beginning in 2011.  In fact, 61 percent anticipate announcing these changes by the end of 2011 in order to begin recognizing accounting savings quickly, while 86 percent expect to actually implement these changes

In addition, Aon Hewitt’s survey found that 36 percent of respondents plan to make changes to their pre-65 retiree benefits strategy to directly leverage the health insurance exchanges that states, or the federal government, are required to create in 2014.  What’s more, 21 percent prefer moving to a pure defined contribution approach, where retirees could use an account established by the employer to purchase coverage through the exchanges.  The balance of these employers anticipate eliminating pre-65 coverage in response to the creation of exchanges.

The ongoing debate over health care reform focuses largely on its impact on the federal government budget and deficit.  What we hear too little about are the tens of millions of Americans with good employer based coverage who are feeling the impact of PPACA .  PPACA requirements cause employers to re-think how and if they should provide these benefits.  PPACA does nothing to control the costs reflected in these plans, but in fact increases costs.  Virtually all cost containment strategies being employed result in direct or indirect cost shifting to employees and retirees.

If those who advocate patients having more “skin in the game” or think patients can be made to act like informed objective consumers and thereby control costs are right, by the time this is all over health care inflation should be negative 5%.

401(k)s, HSAs and why your payroll deductions will keep you working to age 70 and beyond

9 May

Some of us delight in accusing politicians of being shortsighted and failing to consider the long-term consequences of their actions or inaction. However, upon further reflection it seems to me that employers are running a very close second.

The disappearance of the defined benefit pension has caused more and more Americans to be on their own saving for retirement. Even before this trend, it was known that Americans were not great savers, especially for things far in the further such as retirement. That didn’t matter as employers were determined to cut long-term liabilities and embraced the defined contribution pension in the form of 401(k) plans. Today we are amazed at the low retirement account balances of many boomers nearing retirement and we worry about not only the savings rate, but their investment choices along with the ability to make the funds last over a multi-decade retirement.

Leveraging this success, employers concluded that the defined contribution approach was also appropriate for health care benefits and so we have a rush to consumer driven health care, high deductible plans and health savings accounts (HSA). Now workers not only are asked to fund most or all their retirement, but also an increasing portion of medical expenses and to accumulate funds for future medical costs in retirement. We have created a thriving business for companies taking payroll deductions. The secret behind consumer driven health care is that individuals have less money to consume with, be it the health plan’s money or their own.

Soon early retiree medical coverage will not be an issue as retirement before age 70 will be non-existent. Hey, perhaps there is a method to this madness as long as employers don’t mind a cadre of seniors on the payroll.

I’m trying to set priorities. Do I save for retirement first or health care expenses? Should I also purchase long-term care insurance to protect my assets? No, protecting assets is not an issue, you must have assets after all and I’m trying to decide if I put mine into retirement or my HSA.

My personal feelings notwithstanding, this wellness stuff may not be a bad idea. Knowing the status of my health will help me make the best decision whether to put my money into a retirement or health care account. If I’m lucky the wellness program will help me keep working forever. Isn’t that what employers want?

I’ve considered one other scenario. I call it the eat now or later diet. If I diligently save for the future I get to eat later and lose considerable weight today. If I choose to eat today I get to lose considerable weight during what may be left of my poverty-stricken retirement years. It’s a complicated choice as you must figure in all those early bird specials and senior discounts.

My government promises me more and more it can’t pay for and my employer takes away more and more it doesn’t want to pay for. This consumer is being driven… nuts.

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Enrollment of adult children to age 26 in parents health coverage higher than expected

6 May

Twenty-six and out!

According to a report in Kaiser Health News, to date in 2011 600,000 adult children have enrolled in their parents health insurance with most of the enrollment coming in employer self funded plans. At this rate it is estimated that the original projection for enrollment of 1.2 million is too low.

Come 2014 employers will lose the ability to decline enrollment if the child has other coverage available through his or her employer. At that point employers offering the best coverage at the lowest cost will become the target for adverse selection as adult children seek the best deal.

Remember, children do not have to be dependent on the employee (many employers have not updated plan language to reflect this), can be married, employed and do not have to live at home. So, the 25-year-old making $150,000 a year on Wall Street can enroll in her parents plan, possibly for free if the parent is carrying family coverage, and avoid the few hundred dollars a month that she may be required to pay for her employers coverage. (another Wall Street bail out?)

And of course, she is eligible for all the “free” wellness and preventive services required under the law thereby compounding the additional cost to the parents plan.

Pay for performance government style, you should be so lucky -1.2 million workers, 737 with poor performance

6 Apr
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Several years ago I looked at the relationship of pay to performance at the state and federal level for government workers. The short answer then and now is, there is no relationship.  True pay for performance and indeed effective evaluation of individual performance is virtually non-existent.  In the private sector a normal distribution may result in at least five percent or so of all employees designated as a poor or unacceptable performer.  A larger percentage would have performance resulting in no pay increase perhaps designated as partially meeting expectations.  However, as you see below, only six one hundredths of one percent of federal workers were rated has having poor performance and thus denied a raise.  No wonder more and more Americans are seeking employment within government.  They can expect regular raises, terrific benefits, good job security and little worry of a poor performance evaluation.   Can such an environment create anything better than overall mediocrity?  I wonder if the 737 are still on the job?

Take a look at this from the Federal Times:

Does job performance play a factor in employee raises and step increases?

Unions defending the General Schedule say yes.

But the latest numbers say clearly no.

Only 737 out of more than 1.2 million GS employees — or one in every 1,698 — were denied a regularly scheduled step increase and accompanying raise in 2009 because of poor performance, according to data provided by the Office of Personnel Management at Federal Times’ request.

That equates to a 0.06 percent denial rate, which is far lower than any estimates given of how many poor performers exist in the work force. OPM estimated in 1999 that poor performers make up approximately 3.7 percent of the federal work force. A 2000 survey by the Merit Systems Protection Board found that 14.3 percent of federal employees were judged by co-workers to be performing below reasonably expected levels.

In a 2010 government-wide employee satisfaction survey, only 36 percent said they thought differences in performance among employees are recognized in a meaningful way. Only 35 percent said they thought promotions in their work unit were based on merit.

As low as it is, the 0.06 percent rate of denied step increases in 2009 is the highest rate in recent years. OPM statistics show that between fiscal 2004 and 2008, the number of employees denied step increases each year varied between 556 and 696 — or between 0.04 percent and 0.05 percent.

Each grade under the GS system has 10 steps, and every one, two or three years, employees are eligible for a step increase and accompanying pay raise until they reach their grade’s top level. Raises vary between 2.6 percent and 3.3 percent.

These figures are likely to embolden critics of the current federal pay system who argue that federal pay and promotions have no link to employee job performance.

Defenders of the GS system say that step increases are not automatic, and that managers have authority to deny them to poor performers. They oppose new pay-for-performance systems intended to make it easier to withhold pay raises to unsatisfactory employees.

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I’m still critical of employer wellness programs when it comes to reducing health care costs

24 Mar

Measuring the results of a wellness program is always questionable. In fact, most employers don’t measure much and what they do measure has little to do with lowering health care costs. Here is an example of some guidance for measuring a wellness program. It comes from an e-mail I received.

Year 1 Goal: Focus on Participation

60% of employees participate in at least one program element

Year 2 Goal: Add Risk Reduction and Satisfaction Metrics

Health risks improve by at least 2% as measured by health appraisal questionnaire
90% employee satisfaction with the program

Measurable improvement in biometric scores(e.g., BMI, cholesterol, blood pressure) compared to year 1

Year 3 Goal: Increase Expectations; Add Financial Performance Metrics

80% employee participation in health screening and other programs over the previous three-year period

50% spouse participation in health screening

Measurable reduction in health care costs and/or absence rates, corresponding to health risk and/or biometric improvements

A few thoughts:

Participation in one or all elements of a wellness program does not mean you are saving money or improving productivity. That is like assuming employees who attend a retirement or financial planning seminar leave the meeting and actually implement the strategies presented and follow them for the next thirty years, they don’t.

Employee satisfaction with the program is no measure. Employees will be satisfied with a free lunch too, even if burgers, fries and a milkshake are on the menu.

As for a “measurable” reduction in health care costs or absence rate…after three years of such a program, not even a slowing of costs, but a reduction…give me a break.

In addition, how are you going to measure that and attribute it to your employees now knowing their BMI or cholesterol levels?  This is like politicians saying they are raising the budget by $50 billion instead of $60 billion while claiming they have reduced the budget deficit by $10 billion.

While there is hope that better lifestyles will improve health and perhaps manage costs over time, in the short-term health costs may rise with these programs. The person learning of high blood pressure may now be under a doctor’s care taking medication. The same is true for the person with high cholesterol or glucose. Is this better than some more serious and expensive result left untreated?  Of course it is, but that hardly represents a measurable reduction in health care costs within three years and likely much longer.  In addition, the individual must remain an employee for many years in order for the current employer to reap any benefit.

All this for a lousy tee shirt and a $25 credit!

There are a number of organizations selling wellness programs and making a lot of money doing it.  Some employers like the publicity claiming success in lowering health care costs because their employees take a health risk assessment. Some in HR are making a career out of health and wellness, it’s the in thing to do after all.  Today wellness is like apple pie and mother, who can mount an argument against it? 

That’s all fine and no doubt over time many people will benefit, but employers embracing the concept should look past the hype and understand the real impact and cost of such programs. If the goal is to save money, employers must establish realistic long-term goals and measures that are statistically valid, track the actual behavior and claims costs of individuals, etc.   Let’s see claims data on each employee for five years before and five years after the start of a wellness program.    If you don’t find that the most active participants already had lower claims experience and health care costs are lower than at the start of the program, I will be a believer.  That’s a lot easier said than done.

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How did sick days become a pension bonus?

14 Mar

Here is what may appear a dumb question, what is the purpose of sick days?

Logical answer: to pay an employee when he or she is sick AND unable to come to work.

This answer implies a few things. Sick days are not to be used to stay home and wait for the plumber or to care for a child. (That time is called vacation or personal days if you have them). Also, sick days are not a guarantee or a way of accumulating extra cash. Sick days are non existent if you are lucky and you are not sick.

Too bad in many cases, especially when it comes to state and local governments, unused sick days become a termination bonus paid when an employee leaves the job or retires. In many cases these payments are unlimited, in others the payments may have a dollar limit. However, these payments have extra value when they are added to the pension calculation as frequently happens.

If you agree with the concept (old fashioned I know) the your pay assumes you will be on the job each day unless you are truly sick and unable to work, then where is the justification for paying twice for days you worked and then compounding that by including the duplicate pay in a pension thus boosting that payment for life?

While this practice is not limited to public employees, it is by far more common in the public sector. This is just another example of how far we have moved away from the basics.

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