Benefits December 15, 2011

Kroger to Merge Multi-Employer Pension Funds

December 15, 2011 (PLANSPONSOR.com) - Four of the (United Food and Commercial Workers) UFCW/multi-employer pension funds to which The Kroger Co. contributes will merge into a new fund effective January 1, 2012.
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The company said this new arrangement is expected to reduce Kroger’s annual pension contribution expense and will secure the pension benefits of more than 65,000 Kroger associates. The consolidation of the four pension plans into one will provide greater stability of future benefits for Kroger associates, reduce administration costs and enhance the prospects for future returns.   

At the same time, this initiative enables Kroger to cost-effectively fund its contributions by taking advantage of the current low interest-rate environment. The agreement also establishes a pension benefit formula through 2021, which concludes collective bargaining with these 14 UFCW local unions on this subject for the next 10 years.   

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“Given the challenging environment that exists for pension plans today, we are pleased to have reached an agreement that provides a meaningful future benefit for Kroger associates who participate in these plans,” said Mike Schlotman, Kroger’s chief financial officer. “The unique characteristics of these plans, coupled with our strong financial position and today’s low interest rate environment, give us the ability to contribute to the new fund in a manner that we expect to produce significant future savings.”   

Pending market conditions, favorable discussions with the rating agencies and the approval of three remaining UFCW locals, Kroger expects to contribute approximately $650 million to the new fund in January 2012.   

The plans cover more than 65,000 Kroger associates from 14 UFCW local unions. Kroger associates represent 92% of the total active participants in the four funds, which was a key factor that facilitated this arrangement.
Benefits December 15, 2011

Finance and HR Executives' Roles to Change Due to Healthcare Reform

December 15, 2011 (PLANSPONSOR.com) – Finance and HR executives see a partnership between both teams in the future as companies address implications of healthcare reform. 
 
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According to aTowers Watson survey, “Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future,” both groups of executives share an expectation of further increases to their healthcare and other reward budgets in the next few years, although surprisingly, neither sees any change in the mix or cost allocation for their overall reward programs.

The survey found that both groups of respondents see changes ahead in their own roles when it comes to reward programs. Currently, the majority of HR executives (81%) and finance executives (55%) agree that setting a reward program strategy is largely driven by HR. However, in terms of budgeting for rewards, a greater number of finance respondents (53%) indicate they are more involved, compared with 47% of HR executives who see themselves in the lead.

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Looking ahead a few years, the picture does change. More than one-third (38%) of finance executives believe strategy development will be much more of a shared role. In the area of budgeting, more than half (53%) of finance executives expect to have primary responsibility, while 40% of HR respondents say budget setting will remain more of a shared role.

“Companies are just beginning to grapple with the complex set of decisions triggered by the new healthcare reform law – decisions that will have a direct impact on their broader set of employee rewards,” said Randall Abbott, senior Health and Group Benefits consultant at Towers Watson. “The fact that both finance and HR leaders each see a role for the other in developing reward strategy and budgets in the future suggests a powerful framework for joining forces at a time when the stakes for close collaboration have never been greater.”

The survey found numerous areas of confluence to serve as the foundation for closer collaboration. Cost was by far the most important factor for both groups in making decisions about healthcare reform. More HR executives (82%) emphasized cost than did finance leaders (69%). Moreover, two-thirds (67%) of both HR and finance leaders expect to maintain healthcare benefits for their active employees despite their common belief that costs will continue to rise. Yet while both groups expect their per-employee investment in rewards to rise – regardless of their decision to continue providing health care benefits – neither group expects healthcare costs to consume a significantly larger share of the total rewards pie.

“Healthcare reform is a significant business issue that has the potential to test the relationship between HR and finance executives. And, with so much change quickly approaching, it highlights the need for both groups to start working more closely now to leverage their respective expertise and knowledge,” said Abbott. “A strong HR-finance partnership can be mutually beneficial in facing the demands - or taking advantage of the opportunities -of reform while at the same time balancing an organization’s cost objectives and talent and employee engagement needs.”

Other key findings from the survey include:

•  More than half (56%) of finance executives expect their reward programs to provide more flexibility in the future, compared with more than one-third (37%) of HR executives.

•  Both groups of respondents believe their organization is lagging competitors in investing in some elements of their reward programs. About one-third of HR and one-fifth of finance executives indicated their costs for training, career management and flexible work arrangements fell below competitive norms.

•  A substantial number of finance executives also think their organization overinvests in some of the so-called “environmental” rewards. Specifically, finance respondents were more than three times as likely as their HR peers to believe their organization outspends competitors in the areas of career management (29% versus 9%) and flexible work arrangements (31% versus 9%).

 

The Towers Watson/Forbes Insights Survey was conducted in September 2011, and includes responses from 104 human resource executives and 201 finance executives at U.S and global organizations. Survey respondents ranged in size from 1,000 to 25,000 employees and represented a broad range of industries.

The full report is available at http://towerswatson.com/research/6033.

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