A Combination of Benefits/Perks Drives Overall Employee Well-Being

Those with poor well-being self-reported, on average, that they are only working at 64% of their maximum output.

The O.C. Tanner Institute 2015 Health and Well-Being Study shows that improved well-being has a large impact on employees, the way they work, and ultimately on the company’s bottom-line. Employees who are holistically well deliver a difference for their teams and departments.

In a white paper, O.C. Tanner explains that well-being is not the same as wellness. Traditionally, wellness programs focus on physical attributes and provide employees with gym memberships, meal plans, and healthy snacks. However, well-being is much more than a measure of physical wellness. It is a measure of a person’s perception of how her life is going—whether it is fulfilling and satisfying, whether she feels her best every day, and where her life is headed in the future. Understanding employee well-being as a holistic life experience reveals a much broader definition of the term—one in which physical wellness, though necessary and important, is only part of the overall well-being story.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

For the study, employee well-being is measured and defined through a set of questions modified from leading academic research on human well-being. The study asks employees to describe their current life situation on a 10-point scale both inside and outside of work. In the context of well-being, employees rate their life at work today lower than their life at home and future life. On average, employees rate their life inside work today at 5.24 on the 10-point scale, and rate their life outside work at 6.36. These scores generally move in the same direction—as an employee’s life at work improves, so does their life outside of work and vice versa.

NEXT: Three dimensions of well-being

The study found that an employee’s well-being is largely affected by three dimensions of wellness—physical wellness, mental wellness, and social wellness.

In order to measure physical wellness, a physical wellness index was created using 19 different elements of physical wellness and includes both positive health habits such as seeing a doctor and losing weight and negative health habits such as smoking. Combining these survey questions yields a physical health index with a maximum score of 16 and a minimum score of -1. Overall, the average for the physical wellness index is 6.09. As employees progress from poor physical wellness through to good physical wellness, overall employee well-being scores also improves from a low of 5.22, on average, to a high of 6.66.

Having good social wellness is grounded in work-life balance and the presence of quality, positive interactions with others both at work and at home. From the survey, 16 questions were used to derive an overall social wellness index. Combing these questions yields a social wellness index score between 0 and 6. The distribution of social wellness scores has a range of 5.25 with a low score of 0.75 and a high score of 6. The mean social wellness score from the sample is 3.86. Employees with excellent social wellness had overall well-being scores of 7.21, more than two points higher than those with poor social wellness.

For the study, having good mental wellness is defined by combining 15 survey questions into a mental wellness index. Combining these survey questions yields a mental wellness score between 0 and 6. The distribution of mental wellness scores has a range of 5.47 with a low score of 0.53 and a high score of 6. The mean social wellness score from the sample is 3.89.

The study found that good mental wellness has the largest impact of any individual wellness dimension on overall well-being. The data shows that employees with excellent mental wellness have an overall well-being index score of 7.76, while employees with excellent physical and social wellness lag behind with overall well-being scores of 6.66 and 7.21, respectively. Additionally, the increase in overall well-being between poor mental wellness and excellent mental wellness is 2.26 (more than a 20% increase on the overall well-being scale).

NEXT: Benefits/perks that impact well-being

Those with poor well-being self-reported, on average, that they are only working at 64% of their maximum output. Additionally, those with a poor well-being viewed their immediate work teams more negatively and assessed that their team was only producing, on average, 61% of their maximum output. Those with excellent well-being rate their personal work output as 19% higher (83%) and the work productivity of their immediate team 20% higher (81%).

The study also asked employees about perks and benefits currently offered at the company they worked. Seven benefits impacted overall well-being the most: fair base salary/pay, family emergency leave/family care leave, paid vacation time, maternity leave, open work spaces where teams can meet and collaborate on projects, paid sick leave, and above and beyond employee recognition. These seven benefits saw the largest difference in average well-being between employees who have the perk/benefit at their company compared to employees who do not have the perk/benefit at their company.

Of the seven benefits/perks that most impact well-being, five are traditional benefits: fair base salary/pay, family emergency leave/family care leave, paid vacation time, maternity leave, and paid sick leave. However, O.C. Tanner found employee recognition and open work spaces are of particular interest because they are the only two environmental benefits to have a large impact on well-being. This finding reveals that company culture is just as important to employee well-being as traditional benefits.

The paper suggests that encouraging employees to appreciate one another, educating them on how and when to recognize one another, and empowering them with intuitive recognition tools, are excellent steps to improving employee well-being. When employees feel appreciated, and report being appreciated often, they have higher overall well-being both inside and outside of work at work. In a separate question, O.C. Tanner asked more specific questions about the recognition culture at employees’ companies, and found employees who felt appreciated over the past month had well-being scores 13% higher, on average, than employees who didn’t feel appreciated. 

The report, “The Impact of Excellent Employee Well-Being,” can be downloaded from http://www.octanner.com/institute/white-papers.html.

Reductions in Multiemployer Plan Withdrawal Liability Possible

Rehabilitation plan surcharges and contribution rate increases can be excluded from withdrawal liability installment payment calculations.

An employer that ceases to contribute to a multiemployer pension plan is liable for its allocable share of any underfunding, called “withdrawal liability.” This withdrawal liability has become both prevalent and significant: The Pension Benefit Guaranty Corporation (PBGC)—the federal agency that enforces and regulates multiemployer pension plans—has estimated that approximately 10% of the 1,400 multiemployer pension plans in the U.S. face insolvency in the next 10 to 15 years. In light of the remedial policy of the withdrawal liability laws—the principal purpose of which is to protect the solvency of multiemployer pension plans—it is not surprising that the law has a strong pro-plan bias. A recent arbitration in which I represented the employer, however, illustrates one avenue that may be available to reduce an employer’s withdrawal liability.

The Pension Protection Act 

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Congress enacted the Pension Protection Act of 2006 (PPA) to address the looming multiemployer plan funding crisis. Under the PPA, multiemployer pension plan actuaries are required to annually certify a plan’s funding status, with plans classified in zones ranging from green to red. “Red zone,” or critical status, plans are required to adopt a PPA Rehabilitation Plan (Rehab Plan), a series of actions intended to facilitate the plan’s emergence from critical status. Employers obligated to contribute to critical status plans incur statutory contribution surcharges of 5% to 10% (PPA Surcharges) during the remaining term of the collective bargaining agreement (CBA) in effect when the plan entered critical status. If a Rehab Plan-compliant contribution schedule is not adopted within 180 days of the expiration of this collective bargaining agreement, the employer is obligated to pay the increases under the Rehab Plan’s default contribution schedule (Rehab Plan Increases), which is unilaterally implemented on the employer by the plan.

Withdrawal Liability Payment Rules 

A multiemployer pension plan may not demand payment of withdrawal liability in a single lump sum. An employer is generally obligated to make annual payments determined by statutory formula. This Annual Payment Amount is equal to the product of: 1) the average “contribution base units”—i.e., the basis by which contributions are determined, such as hours worked, and 2) the “highest contribution rate”—i.e., the highest rate at which the employer had an obligation to contribute to the plan (Highest Contribution Rate).[1] 

Generally, absent a mass withdrawal or other catastrophic plan event, an employer is limited to 20 payments of the Annual Payment Amount. Accordingly, and as demonstrated by a recent arbitral decision involving the intersection of the PPA and withdrawal liability payment rules, any reduction in the Annual Payment Amount can drastically reduce an employer’s withdrawal liability.


[1]See ERISA Sections 4219(c), 29 United States Code (USC) Section 1399(c) (Annual Payment Amount formula) and 4212(a), 29 USC Section 1392(a) (definition of obligation to contribute).

Arbitrator: PPA Surcharges and Rehab Plan Increases Were Improperly Included in Highest Contribution Rate 

I recently represented an employer in a withdrawal liability arbitration that resulted in the employer saving approximately $15 million.

Prior to December 30, 2012, the employer was obligated to contribute to the PACE Industry Union-Management Pension Fund on behalf of bargaining unit employees. The employer completely withdrew from the fund as of that date. The occurrence of the complete withdrawal and the more than $46 million withdrawal liability amount asserted by the fund were not in dispute; at issue was the fund’s calculation of the Annual Payment Amount, more specifically, the Highest Contribution Rate.

In determining the Highest Contribution Rate of $1.9093 per hour, the fund included:

  • The rate of $1.574 per hour, as set forth in a participation agreement between the fund and the employer;
  • 10% PPA Surcharges that were imposed on the employer during the term of the collective bargaining agreement in effect when the plan entered PPA critical status; and
  • Non-bargained Rehab Plan Increases unilaterally imposed on the employer 180 days after the expiration of the collective bargaining agreement.

The arbitrator found the fund’s inclusion of both the PPA Surcharges and Rehab Plan Increases in the Highest Contribution Rate wasHighest Contribution Rate was improper and violated the Employee Retirement Income Security Act (ERISA).

PPA Surcharges 

The arbitrator agreed with the 3rd U.S. Circuit Court of Appeals’ holding in Board of Trustees, IBT Local 863 Pension Fund v. C & S Wholesale Grocers that PPA Surcharges were not included in the Highest Contribution Rate. The arbitrator found this conclusion mandated by clear and unambiguous statutory provisions: 1) describing the Highest Contribution Rate as “the highest rate at which the employer had an obligation to contribute”[1], and 2) defining “obligation to contribute” as an obligation to contribute arising either “under one or more collective bargaining (or related) agreements” or “as a result of a duty under applicable labor-management relations law.”[2] 

Agreeing with the 3rd Circuit, the arbitrator held that, to be included in the Highest Contribution Rate, the PPA Surcharges must arise “under either the CBA’s or an applicable labor-management relations law,” concluding that because “the surcharge does not arise under either,”[3] the fund violated ERISA when it included the PPA Surcharges in the Highest Contribution Rate.


[1] ERISA Section 4219(c), 29 USC Section 1399(c).

[2] ERISA Section 4212(a), 29 USC Section 1392(a).

[3]Board of Trustees, IBT Local 863 Pension Fund v. C & S Wholesale Grocers, 802 F.3d at 543.

Rehab Plan Increases 

Unlike PPA Surcharges, the issue of whether Rehab Plan Increases are included in the Highest Contribution Rate was not before the 3rd Circuit in C & S Wholesale Grocers and therefore was one of first impression. The arbitrator similarly found that Sections 4212(a) and 4219(c) of ERISA dictated a finding that the Rehab Plan Increases were improperly included in the Highest Contribution Rate by the fund. The arbitrator found that:

  • The Rehab Plan Increases, implemented unilaterally under the Rehab Plan, did not arise under a collective bargaining agreement but rather arose under a statute (Section 305(e)(1) of ERISA), and
  • The Rehab Plan Increases did not arise as a result of a duty under applicable labor management relations law, because Section 305(e)(1) of ERISA does not directly regulate the relationship between the employer and the union and is therefore not an applicable labor-management relations law.

The arbitrator therefore concluded that the fund violated ERISA when it included the Rehab Plan Increases in the Highest Contribution Rate. As a remedy, the arbitrator ordered the fund to recalculate the Annual Payment Amount without including the PPA Surcharges and the Rehab Plan Increases in the Highest Contribution Rate. This reduced the Annual Payment Amount by more than $700,000 for each year of the employers’ 20-year payment schedule, reducing the employer’s total withdrawal liability payments by approximately $15 million.

*             *             *             *

An employer faced with a demand for withdrawal liability has an uphill battle. However, as demonstrated by this arbitration, it is possible for an employer to obtain substantial reductions in the amount of withdrawal liability payments asserted by a multiemployer pension plan.

*             *             *             *

 

Robert R. Perry is a principal in the New York City office of Jackson Lewis P.C. who focuses his practice on multiemployer pension plans and withdrawal liability disputes. He can be contacted at perryr@jacksonlewis.com.

«