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Collective Bargaining at the Table
Chapter 14 - Collective Bargaining and Benefits - new case on retiree health care
The U.S. Sixth Circuit Court of Appeals recently refused to vest retiree health care benefits before active union workers actually retired. See: Winnett v. Caterpillar Inc., 2009 WL 170598 (6th Cir. 2009). The labor contract had long expired and active workers argued that they had a vested right to retiree health care benefits when they either retired or were eligible to retire. But since the plaintiff employees did not retire before the contract with the retiree health care benefits had expired, the Court ruled they had no vested right to claim these benefits. Subsequent contracts changed the retiree health care benefit for Caterpillar employees and the Court held that since such benefits do not vest until an employee retires, the plaintiffs were covered under subsequent labor agreements that included modified retiree health care benefits. See the Seyfarth analysis of the case.
But there’s more - confusion about retiree health care.
A recent 9th U.S. Circuit Court of Appeals decision recently held that retirees who have lost their previous employer’s sponsored health care need not show their benefits are vested under ERISA. Thus, the dismissal of the lawsuit was overturned and the case will progress. See: Poore v. Simpson Paper Co.
A lower district court held that proof of such vesting under ERISA was necessary. The case will continue with some apparent showing that the retiree’s alleged entitlement to continued retiree health care will be based on other factors.
Chapter 15 Life and Disability Insurance; what about whole life insurance?
Add to Chapter 15 Exercises at page 494, Exercise Number 12: A whole life insurance paying 5.5% tax deferred returns could be a good investment during troubled economic times and financial uncertainty. What are the pros and cons of this proposition?
Corporate owned life insurance - can it be used to fund benefits? (page 494)
Number 13: Some large banks have purchased life insurance policies on the lives of their employees. As the workers die, the banks use the proceeds to pay for bonuses, supplemental retirement benefits, and other deferred pay obligations. Often referred to as “janitor’s insurance” the practice came under Congressional scrutiny in 2006, and there are some rules limiting its use. The IRS has just come out with some interpretative rules pertaining to the 2006 legislation. (See IRS Notice 2009-48, and IRC Sections 101(j) and 60391. There are certain tax benefits for the employer sponsor, such as tax free investment growth and payouts. Do some research on this topic and identify the policy issues that are relevant to such practices. Assume your employer wants to use COLI as a means to fund a variety of tax qualified benefits. What must the employer do in order to facilitate such funding?
But Wait a Minute! What about this case?
Wal-Mart had purchased COLI on the lives of unknowing employees to finance various operational projects. While such financing tactics might run afoul of IRS guidelines, lawsuits brought by heirs of deceased Wal-Mart employees seeking to recover some of the insurance proceeds was dealt a blow by a federal district court. The Court held that the plaintiffs would not be certified as a “class,” and they had no standing to challenge the COLI arrangement. See Atkinson v. Wal-Mat Stores, Inc., M.D. Fla., No. 8:08-cv-691-T-30TBM, 5/26/09. (U.S. District Court, MD of Florida)
Chapter 16, Convenience and Accommodation Benefits and Benefit Administration
Mixed worker demographics - mixed Incentives - the case for multi-faceted benefit administration and design (See Plan Optimization and Communication, Benefits and Beyond, at pages 508-509)
How do you get young people to enlist in a Wellness Program - or, to sign up for regular savings in the company’s 401(k)? Your Money & Your Brain by Jason Zweig (Simon and Schuster, 2007) is a wonderful book about financial planning and investment incentive. Some of the principles in the book are being that used by benefit administrators to better understand how employees react to benefit choices. Benefit enrollment is no longer a “here’s your packet” proposition. Understanding and communicating with a multi-generational work force that comprises vastly different perspectives and values. “Young people want to look good and feel good,” Scott Beekin, VP of Benefits for Great American Company recently told me. An exceptionally high enrollment in the Wellness Program was accomplished at Great American by a lottery -where employees who enrolled in Wellness got a chance to win a convertible, Beekin explained. Similarly, prospective 401(k) enrollees were shown two pictures during the enrollment period - one a homeless person living under a bridge; the other, a handsome, middle aged couple driving a convertible. “Which picture best represents what you want in retirement, ” the photo cut line asked? That pictorial juxtaposition had a major impact on increases in 401(k) enrollment. The book, Your Money and Your Brain, according to Beekin, gave him the ideas to revamp benefit enrollment and he considers it a must read for benefits professionals who need to consider its neuroeconomic principles as they design and administer benefit plans.
Exercise No. 6 (at page 511): Better Benefit Communication
Your CEO has lamented the fact that benefit enrollments for health care and retirement seem so clumsy and complicated. She has asked you to come up with some ideas to personalize, customize, and make benefit communications more effective and efficient. You want to focus your effort on the two health care plans, a PPO and a HDHCP with an HSA, and the 401(k) plan which complies with the IRS safe-harbor provisions. Think about the medium as well as the content. For example, should you continue to use the traditional “packet” of info, pass it out at a meeting, and explain it? Or, should you consider another medium? Should you think about using surveys, decision support tools, benefit calculators, computer modeling scenarios, and suggest ideal benefit packages? (See MetLife’s approach here at: www.metlife.com/broker/enrollmenttoolbox/). Make an outline of your communication approach, offer some examples for both plans, and explain what advantages it will have over your current communication program. Don’t forget: what are the financial advantages to your company in improving benefit communications?
Last revised: July 23, 2009
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