Health Care Spending
Decreases Along
With Downturn
in the Economy

Writing a
Successful Business Plan

Has Your ERISA Defined Contribution Plan
Been Updated for the 2008 PPA Changes?

The Pension Protection Act of 2006 (PPA) was originally conceived as a means of reforming the funding and disclosure rules for Defined Benefit plans. However, the final version of the more than 900-page statute also contains provisions that significantly impact Defined Contribution (DC) plans, like 401K plans.

Among the provisions of the PPA that affect Defined Contribution plans, some of the most significant changes are effective for the 2008 plan year. Highlights of a few of the PPA provisions effective for the 2008 plan year include:

• Testing Changes
  Prior to the PPA, employers were required to calculate interest on the gap period for average deferral percentage (ADP) and annual contribution percentage (ACP) test failures. This requirement has been eliminated for ADP and ACP test failures, but is still required for excess deferrals.

• Safe Harbor for Automatic Enrollment
  The PPA provides a safe harbor which allows employers to avoid ADP, ACP and top-heavy testing through an automatic deferral provision and employer match.

• Rollovers to Roth IRA
  Prior to the PPA, Roth IRAs could only accept rollovers from a designated Roth account, a different Roth IRA or a non-Roth IRA (i.e. qualified rollover contributions). The PPA amended the definition of a qualified rollover contribution to Roth IRAs to include amounts distributed from other qualified plans under Section 401(a), Section 457(b), and Sections 403(a) and (b) annuities.

• Returned Contributions
  If an employer chooses to implement an automatic enrollment provision, under certain circumstances an automatically enrolled participant may withdraw from participation by requesting withdrawal from the plan within 90 days of the first contribution. The normal penalty fee for early withdrawal (a 10 percent additional tax) would not be applicable to these withdrawals.

While some of the PPA changes are mandatory, a number of them are discretionary. Employers that sponsor Defined Contribution Plans need to review their plan documents to determine which, if any, of the mandatory changes are applicable and have their plan documents updated accordingly. Additionally, employers should assess the discretionary provisions of the PPA to determine whether they wish to implement any of the allowed changes.

Benefits counsel can assist you by detailing the allowed and mandatory changes, reviewing plan documents to determine which apply to your specific situation, and preparing any necessary amendments to the plan.

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Handling Employee Requests

As eyecare practitioners and managers, no doubt you find that employees make many kinds of requests, and it is sometimes difficult to determine which ones you must—or should—grant. Generally speaking, considering each request using a simple three-step process will help you figure out how to respond and do so with consistency and certainty.

For illustration, let's consider the case of an employee who asks you for time off to care for her seriously ill mother:

Step 1: What does the law say?
In many instances, the employee's request will be governed by law. For example, the employee who requests a leave of absence to care for his seriously ill mother may be eligible for a legally protected leave under the state and federal family leave laws. You must determine if the employee meets the legal criteria to take a family leave, such as whether you are a large enough employer and whether the employee has worked for you long enough.

If the employee meets the requirements, then grant the leave. If not, don't deny the leave yet without considering step 2.

Step 2: What does your employee handbook say?
Even if the law doesn’t require you to grant the employee's request, look at what your employee handbook says about it. You may have policies that are more generous than what the law provides.

Does your practice have a policy providing medical leaves of absence other than those required by the family leave laws? Or do you have a policy allowing personal leaves of absence? If so, determine whether the employee meets the requirements of those policies. If not, move on to step 3.

Step 3: What is your past practice?
If nothing in the law or your policies would require you to grant the request, consider your past practices. Even if your handbook does not provide for leaves of absence of any kind, look back to whether any leaves have nonetheless been granted in the past.

Often the way a company actually acts may be different from what is stated in its employee handbook. Maybe you granted an employee a leave of absence a few years ago when her child had surgery, or gave another employee a week of unpaid leave when her sister was terminally ill.

If you've granted such leaves before, consider whether this is a similar situation. Could this employee claim you were discriminating against him by not granting this leave? The key is to treat similarly situated employees similarly unless there is a valid business justification for treating them differently.

If there is a valid business reason for denying this leave even though others have been granted, could you document that reason if necessary? For example, you could show that this employee requested time off during your busy season, while the other requests were during the slow season.

If nothing in the law, your policies or your past practices indicates you must grant the request, then you are free to grant or deny it at your practice’s discretion. Keep in mind, however, that this decision could well set a precedent for future requests.

Are Performance Reviews Really Necessary?

Many ECPs may wonder if it is essential to do performance reviews, and, if so, how often should the performance review process be used?

While there are no laws that require employers to complete performance reviews for employees at any point during employment, performance reviews benefit both the employer and the employee, and a formal review should be completed at least annually.

In fact, providing continuous performance feedback to employees is the best business practice. An employee should never be surprised with criticism communicated for the first time in a performance review.

In a company culture that values employee performance, employers should be transparent about the company's goals and the department’s objectives. Each employee should have written goals and objectives, based on his or her job description, and understand how performance directly impacts the department and ultimately the company's overall goals and objectives. Managers should meet with employees at least quarterly for an informal discussion about how each employee's performance is measuring toward his or her goals and objectives. A more formal written review should then be done twice a year.

This is especially important if you are a pay-for-performance organization. Employees should have a clear line of sight to their individual goals as well as overall company goals and the rewards for meeting and exceeding the goals. Pay-for-performance organizations motivate employees to perform to the best of their abilities. In pay-for-performance organizations, employees who don't perform to the business' expectation don't receive rewards, and employees who perform at or above the expectation should receive rewards accordingly.

A written performance review can also help with disciplinary actions when an employee is not performing at acceptable expectation levels or meeting goals and objectives. It serves as a written record of the employee's performance shortfalls, and we all know how important documentation is for disciplinary actions and terminations.

Also, a performance review is not about the structure of the form. Too often employers get caught up wondering whether the form should be a rated scale, written comments or a combination. They weigh, for example, if the form should have a three-or five-tier rating scale, and whether it should be one page or 10 pages. First and foremost, the manager should provide clear, objective feedback, based on the employee's goals and objectives with specific business related examples, while the structure of the form should be secondary in consideration.

Source: SHRM HR Knowledge Center

Most Important Aspects of Employee Satisfaction

Source: Society for Human Resources Management 2008 Job Satisfaction Survey Report

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Congress Extends E-Verify Until March 2009

On Oct. 1, 2008, Congress voted to extend the U.S. Department of Homeland Security's employment verification program E-Verify, but only for four months until March 6, 2009. Without the extension, the E-Verify program would have expired on Nov. 30, 2008.

This is a much shorter extension than the Bush Administration had wanted—and it represents a major victory for the Society for Human Resource Management (SHRM), which has been critical of the inadequacies of E-Verify. Originally, the House of Representatives had passed a bill (H.R. 6633) that would have extended the program for five years.

The extension of E-Verify was contained in a huge spending bill called the continuing budget resolution. The budget resolution was necessary because Congress had not passed a single one of the 12 regular funding bills for the fiscal year 2009.

Access to Health Care Insurance

According to the Bureau of Labor Statistics, health care benefits can vary greatly depending on where you are employed and if you work in the private or public sector.

Some 70 percent of Americans who work for private industry or governments are offered medical care benefits. Some 94 percent of management employees and 88 percent of unionized workers have health coverage. Eighty-seven percent of state and local government employees are insured. (Federal employees were not surveyed.)

One-fourth of part-time workers and half of service staffers have access to medical benefits. The best deal on health insurance coverage is offered by state and local governments. They pick up 90 percent of a single person's premium. In private industry, the average is 81 percent.

Source: Bureau of Labor Statistics.

Employees' Average Monthly Premium Contribution,
1999 – 2007

Employees' average monthly premium costs for employer-sponsored health care have risen every year since 1999.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits

It's Your Business
Health Care
Spending
Decreases
Along With
Downturn
in the Economy

From the Top
Has Your ERISA
Defined Contribution
Plan Been Updated
for the 2008
PPA Changes?

Ask the Experts
Writing a
Successful
Business
Plan

People Management
Handling Employee
Requests

Are Performance
Reviews Really
Necessary?

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