ABC Says Health Reform Could Hurt Employer-Based Model

January 8, 2010 (PLANSPONSOR.com) – The American Benefits Council (ABC) says strict requirements on employer-sponsored health coverage are likely to lead more companies to pay penalties rather than offer coverage.

In a list of recommendations to Congress on employer issues to consider in the health reform legislation, the ABC said employers “must continue … to have flexibility to design benefit plans that meet the unique needs of their workforce and should not be required to meet highly prescriptive, ‘one-size-fits-all’ coverage standards set by federal regulations or make specified contributions for the mandated coverage.”

The council urged lawmakers now reconciling House and Senate versions of health reform (see Health Reform Bill Okayed by U.S. Senate) to delete the House version’s “pay or play” provisions that require employers to meet minimum benefit requirements, minimum premium contribution requirements and a 70% minimum actuarial value standard or else pay a penalty of 8% of payroll. The ABC said employer responsibility provisions should be no more restrictive than those included in the Senate bill.

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In addition, the council recommended that lawmakers:

  • apply employer responsibilities only with respect to full-time employees;
  • define full-time work as a minimum of 390 hours per quarter, so that employers are not subject to penalties if coverage is not provided to temporary or seasonal workers; and
  • allow up to a 90-day waiting period, without penalty, so that employers with high turnover in the workforce are not required to enroll employees until the end of this period.

The council requested that Congress preserve the regulatory framework established by the Employee Retirement Income Security Act of 1974 (ERISA) because it “allows employers to design benefit plans that meet the needs of their employees, permits multi-state employers to consistently administer these essential benefits without being subject to conflicting state or local regulations and establishes a federal framework governing any litigation involving employer-sponsored benefits.”

The ABC also suggested that employers that sponsor generous plans for their employees should not also be required pay a penalty or provide a voucher to employees who opt out of their employer plan, and it encouraged incentives for workplace wellness programs.

The American Benefits Council’s complete list of recommendations is here.  

The Employee Benefit Research Institute has also weighed in on how health reform could hurt employer retiree health care offerings (see Health Reform Could Incent Employers to Drop Retiree Health Care).

TCW Sues Former CIO

January 7, 2010 (PLANSPONSOR.com) - Trust Company of the West sued its former chief investment officer, Jeffrey Gundlach, accusing him of stealing confidential data, lying to potential clients and keeping drugs and pornographic materials in his office. 

TCW said in the lawsuit that Gundlach was fired for threatening to take actions that would have jeopardized the firm’s ability to manage clients’ fixed income assets.      

TCW’s lawsuit claimed that an examination of Gundlach’s office on December 4, the day he was fired, revealed “plastic containers and bags containing green leafy substances and seeds, some explicitly labeled marijuana, as well as three tin foil tubes, the ends of two of which were burnt,” according to Reuters.  According to the lawsuit, the office also contained dozens of pornographic magazines and videos.      

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“Gutter Tactic”      

A statement from DoubleLine Capital LP, the firm Gundlach opened days after being fired, said that “The false and hyperbolic personal attacks by TCW are obviously a gratuitous and irrelevant gutter tactic, which merely underscores the weakness of TCW’s claims.”      

The Reuters report notes that Gundlach has already hired away more than 40 of his former colleagues, and since his departure, TCW clients have withdrawn billions of dollars from the Los Angeles-based firm’s bond funds.      

The 39-page complaint filed on Thursday in California Superior Court in Los Angeles also named Gundlach’s new firm, DoubleLine, and three other former TCW employees who joined Gundlach as defendants.  It seeks unspecified monetary damages, ownership rights of Gundlach’s new firm and other remedies. TCW said the “measurable” harm it had suffered already exceeded $200 million in addition to uncalculated “intangible” losses, according to the report.      

In the complaint, TCW said it found evidence that several of Gundlach’s colleagues who joined him at DoubleLine had spent weeks downloading investment positions, analytical software and proprietary information about clients to portable computer drives.  The suit claims that Gundlach and other colleagues confronted TCW Chief Executive Marc Stern and threatened to quit the firm at a September 3 meeting.  After that meeting they “feigned satisfaction” while “secretly plotting their departures,” TCW said in the lawsuit.      

The complaint is online at http://online.wsj.com/documents/TCWcomplaint.pdf

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