Compliance January 28, 2010

Senator Proposes Tax Cut for Employers Who Increase Pay

January 28, 2010 (PLANSPONSOR.com) - U.S. Senator Russ Feingold (D-Wisconsin) has introduced legislation creating a temporary jobs tax credit over the next two years for businesses that hire new employees, expand work hours for their current workforce, or raise worker pay.
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According to a Feingold press release, the tax credit would equal 15% of the increase in eligible payroll for 2010 and 10% of the increase in 2011. Calculation of the credit would be based on a firm’s total eligible payroll so it would reward firms that expand work hours or raise pay as well as hiring more workers, and it would be calculated on a quarter over year-ago-quarter basis to avoid seasonal employment spikes.

Under the proposal, pay hikes for high-salary workers ineligible, as are wages of firm owners and their family members.

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The press release said the Congressional Budget Office recently released a report indicating that a tax break such as Feingold’s proposal would be among the most efficient and effective ways to spur employment.  The CBO report estimated a similar jobs tax credit would boost gross domestic product by as much as $1.30 for every dollar spent, and would increase employment by as much as 18 net full-time equivalent jobs for every million dollars invested through the credit, according to the announcement.

Feingold said the tax credit would be offset so as not to increase the deficit.

Benefits January 28, 2010

Recession Has Taken Toll on Employee Retirement and Benefits

January 28, 2010 (PLANSPONSOR.com) - More than half (52%) of respondents to a Towers Watson survey said the percentage of their employees working past their desired retirement age is higher than it was before the financial crisis.
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Nearly a third (31%) said they expect that percentage will be even higher next year, according to a press release.

In addition, 30% of companies reported employees have on average reduced their contributions to 401(k) plans from pre-financial crisis levels, and 51% have seen an increase in employees’ hardship withdrawals from pre-financial crisis levels. Almost half (48%) of U.S. respondents said employees had shifted 401(k) plan allocations out of equities; however, 37% expect employees to shift back toward equities a year from now, the press release said.

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Thirty-two percent of companies reported that their employees’ cost of health care coverage is higher now than it was before the financial crisis, and 38% indicated they think it will be even higher a year from now.

While 28% of employers expect that, a year from now, they will put more emphasis on ensuring benefits provide a desired level of security for employees, the survey found much larger numbers of respondents expect to increase their focus on controlling and reducing benefit costs (53%) and managing the risk and volatility of those costs (49%).

Recession Improves Productivity?

Not surprisingly, 41% of respondents to the Towers Watson survey agree that it’s easier to retain talent now than it was before the financial crisis; however, 51% think that retention will be more difficult a year from now. Respondents also noted a rise in productivity over the past year, with just over half (55%) agreeing that employee productivity had risen compared with pre-financial crisis levels, and 48% expecting it will continue to rise by next year.

Respondents' reports on the recession’s impact on employee engagement are mixed. While 30% report lower engagement today, 28% believe employee engagement has risen since before the financial crisis. For 2010, far more companies expect engagement to rise (39%) than decline (5%).

The survey found that 92% of respondents plan to hire in 2010. However, 36% are also planning targeted workforce reductions - down from the 58% that have done so since the financial crisis began.

The survey, based on responses from 118 mostly large employers in the United States and 459 employers globally, was conducted in early January.

The survey report is available at http://www.towerswatson.com/research/960.

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