Benefits April 20, 2005

HR Outsourcing Brings Cost Savings, Satisfaction

April 20, 2005 (PLANSPONSOR.com) - The latest examination of the cost savings from human resource outsourcing asserted that there is a high satisfaction rate with both quality and savings.
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PricewaterhouseCoopers has released a statement reporting that of the nation’s fastest-growing companies, 83% outsource at least some HR functions and 61% are seeing cost savings. Overall, the report states that 81% of CEOs polled say their experience with outsourcing has met or exceeded expectations, while only 15% reported a “mixed” experience. Ninety-four percent are satisfied with quality levels and 87% are satisfied with cost-savings, which average 16.7%, according to the news release.

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Seventy-four percent of those polled said that their HR outsourcing budget has held steady for the past two years, while 4% said that it has decreased. Going forward, 62% expect no change in this budget, while 3% expect it to decrease.

There are a wide array of reasons to outsource, according to the poll. At these companies, 82% cited compliance with complicated federal and state regulations as a reason to outsource, while 71% cited the need to reduce and control operating costs. Other reasons were eliminating costs of in-house systems (71%), improving process inefficiencies (70%), and eliminate difficult-to-manage functions (67%).

The most often outsourced HR functions of those in the poll were 401(k)/DC plan administration (71%) and payroll processing (64%).

The report stands in contrast to another released Tuesday that stated that many firms are repatriating outsourced function because of lack of costs savings and dissatisfaction (See Many Companies Repatriating Outsourced Functions ).

PricewaterhouseCoopers’ “Trendsetter Barometer” is compiled with the help of BSI Global Research.

Compliance April 19, 2005

No Application for Benefits, No Exhaustion of Administrative Remedies, Court Rules

April 19, 2005 (PLANSPONSOR.com) - A participant in a severance plan who only learned about his ineligibility for benefits through an informal conversation with a human resources executive but did not apply for those benefits failed to exhaust his administrative remedies, according to a federal court.
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US District Judge William Skretny of the US District Court for the Western District of New York granted summary judgment to the participant’s employer, Dunlop Tire Corp. in the ruling, stating that the participant, by not applying for benefits, failed to exhaust administrative remedies in the matter, according to BNA.

Kenneth McNinch, the participant, was an employee at the company for over 30 years, and eventually was manager of one of Dunlop’s tire stores. After Goodyear took control of the company in 1999, he became an employee of Goodyear-Dunlop Tire North America. At this point, he was informed via letter that Goodyear-Dunlop would assume all obligations of Dunlop Tire’s severance plan.

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Two years later McNinch attended a meeting with Goodyear-Dunlop’s manager for human resources to talk about transferring the store to Goodyear Tire and Rubber Co. At the meeting, the manager supposedly noted that under the severance plan, McNinch would be entitled to two weeks severance pay for every year he had worked at the company.

However, after the meeting, McNinch claimed he heard that he would be entitled to only a quarter of the severance pay, and further claimed he called the human resources manager and was told by her that he would receive only that 25%.

In 2002, McNinch retired after staying on as a store manager for Goodyear, having never requested anything in writing in regards to the severance plan, and had not made a formal request for plan benefits. He then brought suit against the company in state court on allegations of breach of contract; Goodyear eventually removed the case to federal court under the Employee Retirement Income Security Act (ERISA).

Skretny noted in his opinion that McNinch’s claim for severance benefits never became appropriate for legal review because his employment was never terminated from Goodyear-Dunlop but instead had retired.

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