The latest Carnival of HR is up over at UpstartHR. Check out the 25 pieces of HR awesomeness posted – including the Bottom Line on Benefits, by our own Christine Mitchell!

Open Enrollment is oftentimes one of the busiest times of the year for an employer.  However, the economic downturn has made the process much more of an arduous endeavor this time around than in years past, as some companies have had to make the excruciating decision to drastically alter or even remove portions of their benefit packages in order to remain financially strong.  If your company falls into this unfortunate sector, then you know that conveying the information to the workforce is just as nerve wracking as the initial determination itself, if not more so.  Anger and disillusionment can easily drape your staff upon hearing the news that some of their benefits they have enjoyed in previous years are either skyrocketing in price or going away altogether.  However, if you properly prepare this necessary interoffice communication, you can make great strides to minimizing the malaise that will be poised to sweep through the office.

The most important thing you can do in light of the potential onslaught is to be sure the communication with your staff over this matter comes across as empathetic, and not just sympathetic.  In other words, meet their mindset as much as possible.  Make certain each memo, e-mail, and newsletter that addresses benefit changes avoids sounding generically corporate and communicates at the staff’s level.  This approach will help to answer a great deal of the workforce’s “why” questions before they get a chance to be asked. 

You can achieve this by pulling back on using blanket statements and revealing an appropriate level of reasoning behind the decision instead.  For example, phrases like “in these tough economic times” have been so overused as the de facto, near clichéd way to signal that bad financial news is afoot that they have become rather cold, impersonal expressions.  Your employees know that everyone is a wading through treacherous monetary waters; a shopworn statement that merely states the obvious will most likely make you look aloof and unaffected in the eyes of your staff.   The better way to inform your staff about the benefit changes would be to provide as much concrete data to the workforce as you feel comfortable sharing.  Just simply stating the ways the economic downturn have affected the company goes a long way than just reiterating a hodgepodge of “times are tough” rhetoric.   You don’t have to open your books or other private ledgers to accomplish this; merely giving innocuous explanations on how the economy has affected you as an employer will actively demonstrate to your employees that you have felt the pinch of the economy every bit as they have.  Moreover, it enhances the element of equality and camaraderie to decisions that otherwise may look a bit feudalistic. 

Additionally, as you share this information with your workforce, do not try and sugarcoat the situation by beginning your announcement with flowery statements of employee appreciation.  On paper, an opening salvo speaking of how the company cares about its staff looks like a good strategy.  However, the reality is such leadoff phraseology may backfire, because your workforce may interpret it as a bait-and-switch of sorts, which could foster feelings of disingenuousness.  Instead, your best bet is to save the words of compassion until after the news has been broken and the facts and data associated with it have been laid out.  Once this foundation has been established, then you can (and should) build up spires of benevolence. 

Of course, there will be grumblings amongst the workforce no matter how you break the bad tidings.  However, following these guidelines can go a long way into keeping such complaints low, which in turn will lessen any dip in office morale.  It will also help reinforce and strengthen bonds between you and your staff, which can ultimately serve you quite handsomely once the economy recovers.

What do you think?  Would following these guidelines help stem the flow of negative vibes throughout the office?  What tactics have you deployed in informing your workforce about tough decisions regarding benefit changes?

There are many tools that can be used to educate your employees. For example, if you are using an online enrollment system, encourage your employees to utilize the site and review the information available to them. Many employers want to make the enrollment process “easy” for their employees and tell them that they don’t need to worry about anything if they don’t want to make any changes. I think this is a disservice, because those employers are encouraging them not to be interested in this subject. 

The subject of “insurance” awareness is similar to “tax code” or “investment” awareness. Most people throw up their hands at the mere mention of these subjects, feeling that they are too complicated to understand and they will deal with it when and if they have to. I say to be forewarned is to be fore-armed. The time to know the best place to take your child for emergency treatment of a broken arm is not when it happens. You should know which facilities are in your network and whether it is best to go the Emergency Room of a hospital (probably not), an Urgent Care Facility, or your doctor’s office.

We need to have more informed consumers of health care. They need to be educated in fraud and abuse tactics so that they can be instrumental in containing health care costs. If they have had a recent array of testing done by a doctor, they should know that sometimes these test results can be shared with a second doctor and not have them repeated. We have all heard the term “second opinion,” but how often do people actually get one? Do employees realize that sometimes the best place for treatment may not be in their own community? There are facilities that have been designated as “Centers of Care” for specific conditions or procedures. 

The attitude of “I don’t have to worry, the insurance will pay for it” needs to stop. People need to be educated to assume responsibility and participate in managing their health care. There is no such thing as a “free lunch.” You will pay for it now or later in the form of increased premiums or other costs.

The bottom line is: encourage your employees to be educated in their entire employee benefit package. Don’t offer short cuts; keep them involved. Knowledge is power. In the long run, they can help contain your costs by becoming responsible, knowledgeable consumers of health care.

So, how do we get a good offence? We create a strategy, or a plan of attack, so to speak.

Step 1: Encourage employees to get flu shots. You can’t turn around without being reminded that the swine flu pandemic is nigh; it’s the new apocalypse. Half of your workforce will all be out sick at the same time! Millions of people will die! We should all rush out and get the swine flu vaccine! Well, should that last one become available, it’s probably not a bad idea to get one. But the regular flu shot is important, too, and there are concerns about flu vaccine shortages, so you should get one sooner rather than later.

http://www.findaflushot.com/news_calculator.php lets you calculate the potential cost of the flu to your company. I did a quick calculation on it, and found that the cost of an employer providing flu shots is far less than the cost of lost work days due to employees calling in sick.

No, the seasonal flu vaccine won’t prevent you from contracting H1N1, but it may keep you from getting both the seasonal flu and H1N1 at the same time. For anyone who has had to endure a bout of the flu, I’m sure you don’t even want to imagine having two different flu bugs raging through your system at the same time.

Step 2: Remind employees of the easiest ways to prevent getting sick, such as the proper way to sneeze (into your elbow, not your hand!) and the right way to wash their hands (EVERY time they go to the bathroom, no excuses! Always use soap and water, scrubbing for about 20-30 seconds). Certain fun employee activities may need to be altered: pot lucks are a great way to spread germs. Big bowls of chips where everyone digs in with bare hands? You can guarantee several of those chip-takers have not washed their hands in awhile. Encourage employees to practice sanitary food sharing by making sure that no one touches any food that they aren’t going to consume themselves.

Step 3: Re-communicate your sick policy, which you may want to re-think if you end up with a large number of people coming to work sick. Many health professionals are suggesting that people stay home at the onset of symptoms through 24-48 hours after a fever has broken naturally (no help from acetaminophen or ibuprofen). A lot of companies’ busiest seasons are around this time of year, so many employees may feel that they need to come in. You should be working with your managers to communicate the necessity for those with colds or flu (or any other infectious diseases, like pink eye) to STAY HOME. A few days of resting will get them through their sickness faster, and will also prevent the spread of disease to other employees. Please don’t go this route. Forcing employees to stay home when they’re sick and then punishing them for doing so seems like such a bad idea.

To summarize:

1. Encourage employees to get flu shots: Check!
2. Remind employees of the easiest ways to prevent getting sick: Check!
3. Re-communicate sick policy: Check!

And now we’re ready to tackle the cold and flu season!

Group Stinks, an article written by Scott Woolley in Forbes July 13, 2009 issue has proclaimed all group annuity contracts are dogs.  In this time of specialization, it is great to see a writer take on the roll of an ERISA attorney, contract lawyer, investment manager, plan advisor, and consumer rights advocate.

Are there abuses in the small 401(k) market?  Small being defined as plans with less than 100 employees and $5 million in assets.  Absolutely.  Do they take place in plans with assets of $10 million to $250 million?  Rarely.  Based on Larkspur Data Resources, Mr. Woolley would suggest we have 18,000 dumb companies investing $185 billion of plan assets in dog annuities.  His claim is that all of these products are sold by unscrupulous brokers who are motivated only by lavish commissions.

And Scott, please send me the name of the supervising Texas CPA firm so I can avoid their sophisticated analytical capabilities to not understand or ask the right questions before signing a group contract, or any other business contract.  No matter how much oversight provided by the SEC and the State Department of Insurance, you cannot protect companies from making potentially poor business decisions.

I am not defending the high cost and abusive group contracts sold by some companies.  It is the tone and unconstructive generalization about the GACs that prompts me to post this blog. 

In the future I would suggest you interview brokers and advisors who will provide unbiased advice and explain the value of a GAC.  You have received very biased advice from competitors selling against the products.  Not sure if they have any more honorable intentions than brokers selling GACs that provide poor value.

Finally, the advice to employees is sound.  Identify what the true costs are to participate by asking your employer to do a thorough review of the expenses and fund performance.  As a fiduciary, this should be done every year.  Use the DOL Fee Disclosure form and have the broker and insurance company complete the form.  Also, have the broker put in writing they are not receiving any other form of compensation other than what is disclosed on the form.  This should be signed by an officer of the brokerage firm.

The 401(k) plans with outrageous fees do negatively impact future account balances.  Having a naive writer author financial articles with limited business acumen and not seeking independent sound opinions/advice could be equally damaging.

One final comment, “Do not complain to your Benefits Department.”  A company with fewer than 100 employees typically does not have a Benefits Department.  There are plenty of complaining employees.  How about offering to form a committee to thoroughly review all aspects of the company 401(k) plan, if there is not one already in place?  This will lead to better results for the employer and for plan participants.

In her July 13th article, “Sick and Getting Sicker,” Simona Covel of The Wall Street Journal treats health care not as a key component of a total rewards program, but rather as a burdensome expense for employers. She identifies health care costs as a cause of business failure, especially small business failure, and says:

At some businesses…health care is the highest expense after salaries —with devastating consequences. Owners must skimp on vital investments like marketing and research. Some can’t hire the people they want because top candidates demand premium coverage. Or they end up under-staffed because of the high cost of insurance — and lose potential clients as a result.

This small paragraph sets the tone for what she will spend the rest of the article doing: that is, positing a non sequitur argument which cites the high cost of health care as the principal cause of decline for four small businesses. The article appeals to emotion, perhaps in the hope that the reader will sympathize with the featured business owners rather than recognize the obvious: while health care proved unaffordable in these examples, their competitors have somehow figured out how to offer it to their employees. Furthermore, these particular business owners appear to have other issues contributing to their business failures.

The article points out that for an Oregon-based Web design company called Media Mechanic LLC, a health plan costing just $400 per employee per month was too expensive. The owner, who was looking for a health plan for new hires, chose to offer two-thirds coverage as a compromise. However, if he had been thinking of health benefits as a part of a total rewards program rather than as his “highest expense after salaries,” he could build an employee cost-sharing plan that is competitive in the market. Does an employee value $60,000 per year in taxable salary more than $55,000 per year with great health benefits?

In another example, the president of M2 Health Care Consulting in Washington D.C., claims that health care costs are keeping her not only from providing coverage, but also from making her staff members full-time employees! “Since the business was created in 2005…[the owner] has relied on local contract workers — currently, five of them.” Normally, a business must pay a higher hourly rate to an independent contractor than to a full-time employee to compensate for not providing a health care plan. Moreover, she says that her inability to afford health benefits has discouraged potential workers from working for M2. Is this a fair example of health benefits costing too much money or is it the failure of an owner to build a culture and manage a rewards program to motivate candidates to join and remain with M2?

Contrary to what Ms. Covel’s article suggests, it seems that the cost of health care is not the key driver to these entrepreneurs’ inability to provide competitive rewards. That these businesses are struggling to hire and retain good employees seems the result not only of high perceived health care costs, but financial difficulties in general, a lack of vision, and a reluctance to invest in human capital.

The article states, “It appears that we are at a stage in business where the US will fail due to health care costs.” I would argue that any entrepreneur who cannot overcome the challenge of building a comprehensive total reward program will not be successful. An entrepreneur will have far greater challenges with sharing a vision, building and maintaining an “employer of choice” culture, establishing authority, making employees part of the solution, and developing great products or services. Simona, health care cost is but one of a hundred challenges that employers deal with every year. Interview one of the many who has overcome them and built a great company.

For those of you who aren’t familiar with the concept, simply stated, dollar cost averaging is consistent investment of  set amount of money in periodic intervals to reduce market risk.  Instead of investing a lump sum trying to time the market, dollar cost averaging spreads out the investments over time and minimizes the negative impact of market fluctuations while taking advantage of the increase in purchase power during down market cycles.

With the above in mind, Precept RPS has consistently included the topic of dollar cost averaging at every employee educational meeting.  However, whenever dollar cost averaging is mentioned or explained, plan participants usually give a look of skepticism or disbelief.  They have a difficult time believing that there’s a potential for investment gain even when the market is substantially down for the year.

To help prove that this concept applies to everyday investors and especially to 401(k) participants who practice dollar cost averaging through payroll deductions, I conducted a little experiment.  I have been tracking 2 mutual funds for the past 11 months, the Schwab S&P 500 Index E Share fund (SWPEX) and the Fidelity Spartan Ext. Market Index Inv fund (FSEMX).  On September 11th, 2008, just prior to the market crash, a share of the Schwab S&P 500 Index fund was $18.98 and a share of the Fidelity Spartan Ext. Market fund was $36.55.  However on July 22nd, 2009, each respective share price was $14.87 and $25.56.  That is a decrease in price of 21.65% and 21.74%!  Yet, as the cliché goes, it’s all about the journey, not the end results.  What if, starting in September 2008 until July 2009, I invested $100 in each fund on the 11th and 22nd day of the month?  How much would I gain or lose?

It may be shocking, but even though the Schwab S&P 500 fund was down about 25% in that time period, through dollar cost averaging, I was up 8.26%.  Similarly, for the Fidelity Spartan Ext. Market fund which was down 28.02% for that time period, I was up 12.78%.  All I did was automatically invest $100 every 11th and 22nd day of the month.  This shows the advantage of practicing dollar cost averaging by increasing your purchasing power during down market and realizing positive returns during the recovery period.

Now, do not use this example as a guarantee that you’ll always realize investment gains.  The purpose of dollar cost averaging is to minimize risk and maximize your potential for investment returns   Instead of guessing when the market is on the rise or fall; this steady approach incurs all the highs and lows in order to balance out the risk.  As we move through this volatile market period, plan participants will realize that dollar cost averaging is applicable in theory and in practice.

For more information:

Dollar Cost Averaging: A Technique that Drastically Reduces Market Risk

Does Dollar Cost Averaging Work?

The U.S. Department of Labor’s Wage and Hour Division reminds employers and employees that the federal minimum wage increases to $7.25 on Friday, July 24, 2009. With this change, employees who are covered by the federal Fair Labor Standards Act will be entitled to be paid no less than $7.25 per hour. This increase is the last of three provided by the enactment of the Fair Minimum Wage Act of 2007. A revised Federal minimum wage poster is now available for viewing, downloading, and posting. Every employer of employees subject to the Fair Labor Standard Act’s minimum wage provisions must post, and keep posted, a notice explaining the Act in a conspicuous place in all of their establishments so as to permit employees to readily read it.