Compliance October 17, 2003

Congressional Cash Balance Opponents Tout "Win"

October 17, 2003 (PLANSPONSOR.com) - Four Congressional anti-cash balance plan activists jubilantly claimed a victory Friday after getting word that the Bush Administration would pursue its cash balance plan goals legislatively instead of through rulemaking.
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>In a letter to their congressional colleagues, US Representatives George Miller (D-California), Bernie Sanders (I-Vermont), Maurice Hinchey (D-New York) and Rahm Emanuel (D-Illinois) quoted an October 10 speech by US Treasury Assistant Secretary for Tax Policy Pamela Olson. According to the letter, Olson told the Practicing Law Institute at a New York meeting that administration officials had decided to avoid a possible prolonged court fight over the controversial retirement plans and, instead, work through the House and Senate.

>The object of the coalition’s efforts were proposed rule changes announced in December 2002 that would permit employers to convert their longstanding defined benefit pension plans to cash balance plans.

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“It appears that the Bush Administration has been forced to back down from its proposal to allow the slashing of pension benefits for millions of employees and retirees throughout America,” the four lawmakers wrote. 

>Last month, the House approved a controlversial amendment blocking any new government cash balance rules. Sanders sponsored the amendment to a Transportation/Treasury Appropriations measure; Miller and Hinchey signed on as co-sponsors (See  Emotion Charged Cash Balance Plan Amendment Passes US House ).

“The proposed rules were extremely controversial because they would allow the pensions promised to older workers to be dramatically reduced, by as much as half,” the letter said. “Tens of thousands of employees and retirees protested these ill-advised regulations, coming in the wake of millions of Americans losing much of their retirement security through the collapse of 401(k) plans and the scandalous behavior of pension managers.”

The four lawmakers said they could accept the Bush Administration effort if it went through normal legislative channels. “If that (cash balance) legislation is developed and considered in a fair and balanced manner, we will have an opportunity to improve the pension security of millions of Americans who just a few days ago faced the imminent loss of billions of dollars in their retirement funds,” the letter said.

A federal judge ruled in August that International Business Machines Corp. (IBM) discriminated against older workers in the calculations used in its conversion to a cash balance plan in 1999 (See   Murphy’s Law: IBM Loses Cash Balance Ruling ).

Benefits October 16, 2003

Poll: Employers Pass Along Higher Health Costs

October 16, 2003 (PLANSPONSOR.com) - With health-care cost inflation running at 14.3% annually, nearly half of the respondents in a recent poll said they're changing their health plan design to cope with the higher costs.
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Nearly half (45%) of the respondents to the survey by the Human Capital practice of Deloitte said they are increasing deductibles, co-payments, and insurance to pass along a portion of the extra coverage costs. Not surprisingly, one in five employers are trying to make their employees better health consumers as their cost-control strategy – up from 9% in a 2001 survey.

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“Clearly, this indicates a major shift by employers to get employees more involved in the health-care process,” said Barbara Gniewek, a principal in Deloitte’s Human Capital practice and the survey’s chief analyst. Two-thirds of employers that have already implemented a consumer-driven plan offer it as an option to their traditional plan lineup

Another 20% of employers reported increasing employee contributions as a primary means to control costs, while 9% said their primary strategy was contracting with lower-cost health plans or administrators through the competitive bid process.

Meanwhile, only 1% of respondents indicate that they’ve implemented a voucher plan, such as a lump-sum cash payment to employees instead of health insurance. However, 11% are thinking about doing so during the next five years.

Additional survey findings include:

  • 85% of respondents said cost was the primary factor driving their health-care strategies. The cost of employer-sponsored health-care benefits increased 14.3% this year to $6,020 per employee from $5,239 in 2002.
  • Prescription drug costs averaged $847 per employee annually in 2002, or 16% of total medical plan expenses.
  • 68% of respondents indicate that the most significant obstacle to changing the current health care model remains employee resistance.
  • Four in 10 feel that managed care is effective in controlling costs and satisfying employee need. while 57% say that Preferred Provider Organization plans offer the most effective approach for employers in managing cost and maintaining quality of care.
  • 72% of respondents indicate that they continue to use printed materials in their open enrollment forms. However, employers are increasingly utilizing Web-based options for health-care communication.

In response to controlling prescription drug benefits costs in the future, 45% said they would increase the level of employee cost-sharing, 21% will change from co-payments to coinsurance, 16% will implement a separate prescription drug deductible, and 6% will implement an annual maximum benefit. Some 12% indicated that they would move from a two-tier to a three-tier/formula benefit. Only 4% indicated that they would drop health-plan coverage for prescription drugs.

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