Tuesday, May 19, 2009

A lift for the laid-off, COBRA changes bedevil employers
Monday, May 18, 2009
Puget Sound Business Journal (Seattle)

by Peter Neurath Contributing Writer

The federal government has begun picking up most of the tab for laid-off workers to continue their health coverage, but employers are feeling pinched by additional costs and hassles.
Since 1985, employees who left their jobs could stay covered under the federal Consolidated Omnibus Budget Reconciliation Act, or COBRA. The ex-workers had to pay 100 percent of the premium plus 2 percent for administrative costs.
President Barack Obama’s federal stimulus bill extends COBRA coverage to employees who’ve been involuntarily terminated since Sept. 1. Employees now pay only 35 percent of the premium, for up to nine months.
Employers shoulder the other 65 percent, but can recapture this expense later by taking a credit against federal payroll taxes.
This sounds simple enough, but the compliance details have left employers woozy. Benefits consultants have been holding filled-to-capacity seminars to help confused employers fully understand what’s demanded.
“Employers are telling us they are feeling overwhelmed by the new COBRA legislation,” said Kevin Cipoletti, area sales and marketing vice president at Gallagher Benefit Services Inc., in Bellevue.
Compliance isn’t just taking extra time; it costs money, said Trish Stober, director of compliance and operations at ClearPoint, in Seattle.
“The so-called stimulus from the federal government isn’t really a stimulus at all,” she said. “It is a cost shift to employers — who are being left with increased costs related to administration and (health care) utilization,”.
If the new subsidy lures more terminated employees to opt for COBRA coverage, employers may see higher insurance premiums next year, she said. That’s because COBRA participants, statistically, use more benefits than the average insured person.
According to ClearPoint, employees who leave their jobs tend to sign up for COBRA if they need medical treatment, which will increase the cost of their former employers’ health insurance. A healthy 23-year-old might well pass on COBRA, but a 43-year-old with a health condition is sure to sign up.
“COBRA is terrific for individuals,” Stober said. “But it could drive up health-care plan costs.”
There’s another cost as well. The law applies to those who lost their jobs as far back as Sept. 1, 2008. So employers must track down everyone eligible and inform them that they can elect to have subsidized COBRA coverage, said Alicia Scalzo Wilmoth, benefits counsel at Kibble & Prentice, in Seattle.
Technically, employers should have done this by now. The Labor Department issued model notices to use in contacting this group, Wilmoth said, and employers were expected to have notified ex-workers by April 18. What’s more, employers are required to tell current COBRA users that they also qualify for the subsidy.
If employers failed to do this by April 18, Wilmoth said, “they better get on it now.”
“Our research shows that there is not a lot of awareness of the new COBRA law,” observed Jim Hebert, president of Hebert Research Inc., in Bellevue. “And there’s confusion about what it actually involves. Whoever’s responsible for benefits needs to get hold of an insurance broker and make this a priority.”
One of the most befuddling issues is which former employees fall within the definition of “involuntary termination,” Wilmoth said.
“It’s very confusing,” she said, “because the guidance language is tough to decipher.”
Former employees are eligible for subsidized COBRA coverage, for instance, if they resigned, were discharged for reasons other than gross misconduct, were laid off, or because they lost benefits owing to a strike, lockout or to reduced work hours. They also qualify if they were involved in a divorce or legal separation that terminates the ex-spouse’s eligibility for benefits, or a dependent child is no longer covered.
“Via our compliance help desk and our COBRA seminars and webinars, we have received at least 100 questions on the new COBRA regulations,” said ClearPoint’s Stober.
The burden on employers varies with the number of terminated employees, reasons for termination, the processes in place for capturing data and how companies are handling COBRA administration, said Gallagher’s Cipoletti.
Those administering all this in-house have seen a significant increase in administrative workload and the number of steps they must take to comply with the law, he said.
“Even those that outsource COBRA services have seen an increased workload,” Cipoletti said.
All this is proving expensive as well as laborious.
There are a lot of hidden costs in the new COBRA law, Stober said, including printing letters and paying for postage.
Even if employers have been using vendors to administer COBRA, Stober said, the vendors now are charging more to cope with the new regulations. One, she said, is charging an extra $1,000.

Sunday, May 3, 2009

U.S. Workers' Wages Stagnate As Firms Rush to Slash Costs
By Annys Shin
Washington Post Staff Writer
Sunday, May 3, 2009

In December, Timothy Owner, a trombone player with the Virginia Symphony Orchestra, called his landlord to tell her he might have trouble paying rent around May. He and the orchestra's 53 other full-time members, many of whom are paid less than $30,000 a year, had agreed to a month-long furlough.
The furlough, which ended yesterday, was rough, Owner said. But he and other musicians acknowledged that the alternative could have been worse. "We're less unhappy if this means the orchestra will survive," he said.
Across the country, workers' earnings are stagnating or, in some cases, declining. For many Americans, the setbacks are all the more troubling because they have lost so much wealth in recent months, with the value of their homes and retirement packages plummeting.
Employers big and small have resorted to slashing hours and once-unthinkable wage cuts. In March, staffing agencies that work for Microsoft agreed to a 10 percent reduction in their bill rate. In April, hotel operators in New York City asked unionized waiters, housekeepers and bellhops to reopen their contract and accept wage cuts. State governments such as Indiana's have frozen pay, while others, including Maryland and California, have furloughed employees.
According to a recent Washington Post-ABC News poll, more than a third of Americans say they or someone in their household has had their hours or pay cut in the past few months. That's a nine-point increase since a similar poll was conducted in February.
Wages in absolute terms -- not adjusted for inflation -- tend not to fall, even during economic downturns. In a study of the recession of the early 1990s, Yale economist Truman Bewley found that employers are loath to reduce wages because of the potential impact on morale and productivity. That's why wages are considered "sticky" -- they rarely slip.
So far, there's no evidence that cuts to compensation have reversed overall wage growth. But, as in past recessions, the growth is slowing rapidly. The Labor Department's employment cost index, which tracks wages, salaries and benefits, rose in the first quarter by the smallest amount since the index began in 1982.
That bodes ill for those workers trying to rebuild nest eggs depleted by the housing and stock market downturns. To boost their savings, they typically need faster income growth or lower spending, and, as Harvard University economist Lawrence Katz put it, "It is going to be a long time before we see sustained pay raises."
The previous U.S. recession, in 2001, was relatively weak and didn't last the full year. But once inflation is factored in, wages actually fell, sapping workers' buying power, and didn't return to pre-recession levels until 2006, just before the economy fell into its latest funk. As a result, from 2000 to 2007, the median income of American households, when adjusted for inflation, fell by $324, according to the Commerce Department.
By comparison, the current recession has already lasted 17 months and is far more severe than the last one.
Wages for new hires have already fallen, according to an index compiled by the Society for Human Resource Management, a trade association based in Alexandria. Temporary workers' hourly rates are shrinking, too. Joanie Ruge, senior vice president of the staffing firm Adecco Group North America, said her company's clients have shaved as much as 10 percent off their rates.
In recent months, falling energy and food prices have helped Americans stretch their money. But inflation could easily erode those gains if it returns to a more normal annual rate of about 3 percent.
Experts fear that wages will not keep up. Once the recession ends, economists expect, the recovery will be long and slow, with sluggish job creation. Without a tight labor market, employers won't have to compete as much for talent and workers will have less leverage to push for higher pay, experts say.
"Once you knock down wage growth, it will take a substantial change in unemployment to move it again," said Lawrence Mishel, president of the Economic Policy Institute, a left-leaning think tank in Washington. "The recovery is going to be weak. I think as wage growth subsides, it is going to subside for many years."
Members and employees of the Virginia Symphony Orchestra are bracing for more hard times. The orchestra has had to contend with a $1.5 billion debt. Carla Johnson, the VSO's executive director, said she noticed donations and ticket sales start to slide in 2007, before the recession officially started. After the economy took a nose dive in September, grants dried up. People who had pledged to buy season tickets reneged. Some longtime subscribers, in particular retirees living off investment income, "were so embarrassed they could barely speak to us," Johnson said. The musicians were furloughed, and the administrative staff, including Johnson, took a 20 percent pay cut. The two moves saved the VSO about $500,000.
Since then, nearly everyone with the orchestra has had to make adjustments. Viola player Matthew Umlauf, the primary breadwinner for his family of four, shelved plans to buy a house in order to put more money aside in an emergency fund. Owner, the trombone player, called friends around the country in search of gigs in April to make up for his lost income. Public relations director Donna Hudgins planted a vegetable garden, while her husband, a judge who recently stepped down, went back to work as a substitute judge. He's worked every day since he retired, she said, and she has no plans to stop, either. "I'm working longer than I ever thought I would," Hudgins said.
She and other VSO staff, who are not unionized, had little say in the changes. But the orchestra members, who are organized, did. They accepted the furlough knowing that the standard cost-cutting measure -- layoffs -- was not an option. A clarinet player, for instance, can't pick up the slack for a missing violinist.
Orchestras everywhere are feeling the pain. Just last week, members of the Baltimore Symphony Orchestra volunteered to give up wage increases and other benefits in order to save the BSO $1 million.
The VSO members will probably have to make further concessions during upcoming contract negotiations, Johnson said. While the musicians don't relish the idea of more financial hardship, the orchestra members said they will find some way to keep performing.
"We don't stop playing because times get tough," Owner said. "We love what we do."

Sunday, January 11, 2009

Majority of Americans Favor $775 Billion Economic Stimulus
Support particularly high for infrastructure investment and tax cuts
January 8, 2009
by Frank Newport

PRINCETON, NJ
-- New Gallup polling shows that 53% of Americans favor and 36% oppose Congress' passing a new $775 billion stimulus package of the type President-elect Barack Obama described in his Thursday speech on the economy. There is even higher support for specific elements it could include, such as major new government spending for infrastructure, income tax cuts, and tax incentives for businesses.
Questions asking Americans about a new stimulus plan were included in Gallup Poll Daily tracking Tuesday and Wednesday nights, just before Obama's Thursday speech in which he more formally proposed such a plan. The question wording included specific references to the cost of a new program ($775 billion), and the fact that it would be passed as soon as possible after Obama takes office. These explicit references to Obama may have had the effect of lowering overall support. Indeed, the breakout of support by partisanship shows that Republicans are much less likely than independents or Democrats to support the plan, perhaps foreshadowing the challenge Obama will have in convincing Republican lawmakers to go along with his proposal.
Most likely, this tepid response from Republicans represents both a typical conservative reluctance to increase government spending by such a large amount, as well as a negative reaction to the fact that the plan is being pushed by the Democratic president-elect.
Still, given that 11% of Americans interviewed don't have an opinion on the issue of the stimulus package, the results show that the measure "passes" by a 17-point margin (53% to 36%) when those in favor are compared to those opposed.
When Americans are asked about four different elements that are widely being discussed as part of the new stimulus bill (Obama has not yet put forth a highly specific proposal), support for three of the four is significantly higher than the overall level of support for the bill itself.




It is important to note that the wording of these specifics did not mention costs directly, perhaps making it easier for respondents to say they favored them. Also, the questions asking about spending more on infrastructure and providing tax incentives for businesses included references to the benefit from each in creating jobs, reminding respondents of potential positive outcomes.
As can be seen in the accompanying graph, support is highest for the idea of creating new jobs with "major new government spending on the nation's infrastructure," with slightly lower, but still very high, support for tax cuts for businesses ("to help save and create jobs") and income tax cuts for individuals and couples. Support is significantly lower for the idea of providing federal money to state governments that are facing budget shortfalls.
Implications
These data suggest first and foremost that Obama has the support of a majority of the American people in his attempt to prod Congress to pass a huge economic stimulus plan in the weeks after he takes office. Obama raised the stakes on passage of his plan on Thursday by warning that the economy could become "dramatically worse" if it doesn't pass.
The data also suggest -- from a marketing perspective -- that Obama and his team might be better off talking about the elements of his plan one by one rather than by focusing solely on the overall idea of spending huge amounts of money for a broad bill. In addition, Obama might note that the concept of giving federal money to state governments, if included in the final plan, appears to be the least popular. (Support could be higher if the benefits were more clearly defined in terms of either saving certain programs or keeping state taxes from rising.)
Obama does face resistance to his proposal from rank-and-file Republicans across the country, suggesting that it may not be smooth sailing for his bill when those who are pushing it come up against GOP members of the House and Senate.

Tuesday, January 6, 2009

Hiring Down - Layoffs Up

Rasmussen Employment Index Signals More Weakness in Labor Market
Tuesday, January 06, 2009
The Rasmussen Employment Index, a monthly measure of U.S. worker confidence in the employment market, fell to a record low for the third month in a row.
Just 14% of workers report that their companies are hiring while 27% report lay-offs are coming at their workplace. Both figures are the bleakest ever recorded in the five year history of the Rasmussen Employment Index. This is the third straight month that the number reporting layoffs is higher than the number whose firms are hiring. Prior to the past three months, it had happened only once before (in June of this year).
Overall, the Rasmussen Employment Index fell to 67.0 for December. That’s down a point from the previous month and down twenty-one points since September. Typically, a decline in the Employment Index suggests that the government report on job creation will be weaker than the month before (see
history).
As the nation’s economic woes mount, one-fourth of all American workers (26%) are worried about losing their job in the near future.

Thirty-nine percent (39%) of U.S. workers now say their personal finances are good or excellent. That’s down a point from last month and down four since September.
The Rasmussen Employment Index is based upon telephone interviews with approximately 9,000 employees each month. Results are released on the Tuesday preceding the government report on employment.
Other recent data, including the
Discover Small Business Watch, the Discover Consumer Spending Monitor and the Rasmussen Consumer Index have shown similar trends. Overall, consumer confidence has fallen 24% since September and 50% since the beginning of 2007.
See the Rasmussen Employment Index summary from
November.