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Hay Group Comment Letter to SEC on Proposed Pay Ratio Rules (PDF)

"[T]he Commission should give further consideration to the substantial economic costs and burdens that compliance with the proposed rule will impose on small businesses (in relation to their size) and weigh these against the unknown and unsupported benefits that compliance might provide.... [T]he usefulness of disclosure would be improved and the burden on employers would be lessened by the exclusion of part-time and seasonal workers from the pay ratio calculations .... If the Commission nevertheless determines that part-time and seasonal workers should be included, the Commission should take the logical step of permitting companies to annualize the compensation of such workers."  MORE >>

Sixth Circuit Rejects Change of Union Retirees' Coverage from Group Health Plan to HRA (PDF)

"[The Court finds] that the unilateral implementation of the HRAs breached the [collective bargaining agreements], not because HRAs are 'unreasonable' ... but because the HRAs are simply not what the parties bargained for in the first instance. Again, upon the commencement of their retirement, plaintiffs were entitled to the continuation of the same coverages they had as employees. Upon retirement, they all had company-provided group health insurance coverage, with Kelsey-Hayes paying the full premium for that insurance. The HRAs are not company-provided group insurance; they are health care vouchers -- essentially cash.... [F]ar from the company paying the full premium, the HRAs shift significant risks, including the potential costs of medical care, from the company to plaintiffs." [United Steel, Paper and Forestry, Rubber, Manufacturing Energy, Allied Industrial And Service Workers International Union, AFL-CIO-CLC v. Kelsey-Hayes Company, No. 13-1717 (6th Cir. Apr. 22, 2014)]  MORE >>

Survey Reveals More Standard Pay Rate for Large U.S. Company Directors

"Director pay levels were relatively consistent among top U.S. companies in 2011, regardless of annual revenue, according to results from Hay Group's 2012 Director Compensation & Benefits Survey.... [A]mong top U.S. companies both large and small, median total direct compensation varied by only 21 percent in 2011, despite dramatic differences in companies' annual revenue. According to the survey, in companies with revenues of more than $40 billion, median director pay was $252,500 in 2011, compared to $209,000 for directors of companies with revenues under $10 billion."

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2013 CEO Pay Levels Increase as Companies Brace for Pay Volatility

"2013 saw the first material uptick in pay levels since 2010. Base salaries grew 1.7 percent to $1.2 million, while annual incentive payments increased for the first time since 2010 by 4 percent to $2.3 million, yielding an overall increase of 3.7 percent in median cash compensation to $3.6 million. Long-term incentive (LTI) grants increased as well, growing 3.8 percent to $7.9 million, leaving total direct compensation with a healthy 5.5 percent growth to just more than $11.4 million."

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Is the Sixth Circuit Handcuffing Employers with Retiree Health Benefits?

"[In] the last significant Sixth Circuit decision on this topic, Reese v. CNH America LLC, the Court ... concluded that the employer could unilaterally modify a retiree health plan, provided that the modifications were reasonable. That decision seemed to put the Sixth Circuit more in line with other circuits that had ruled on these issues, and gave employers some relief. But it appears that relief was short-lived.... But does this [new] decision mean that if the company maintains a defined contribution private exchange, it must maintain a standalone insured plan for this group of retirees?... This brings us back to the question: do retirees really want 2006 health care?" [United Steel Workers v. Kelsey-Hayes Company, No. 13-1717 (6th Cir. Apr. 22, 2014)]  MORE >>

Rebalancing Risk in Executive Reward

"[T]he phenomenon of 'loss aversion' (people's tendency to fear loss more than they appreciate gains) ... helps to explain why an executive compensation package that carries little risk can have a higher perceived value than one where both the gains -- and the risks of not achieving those gains -- are higher. Given that employers generally want to pay for performance, their challenge is to find that sweet spot where the perceived value of the package they're offering is higher than that of the competition. The way to do this is to base the comparison on a single number: the certainty equivalent."

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SEC Proposes Rule to Disclose CEO-to-Worker Pay Ratios

"'This pay data is important to investors because it shines a light on the company pay ladder for all employees, not just the pay of top executives that is already disclosed under current rules,' AFL-CIO President Richard Trumka said ... 'The statistic has so much 'noise' that it's rendered meaningless, failing to take into account key differences between strategy, sectors and geographies, among other factors, all of which impact a company's pay ratio,' [said Irv Becker, national practice leader for the U.S. executive compensation practice at Hay Group]."

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CEO Pay Levels Increased Slightly in 2012 as Companies Continue to Navigate Say-on-Pay Era

"After seeing CEO pay jump a significant 11 percent in 2010, 2012 marked the second consecutive year that total compensation showed only modest increases. Base salaries grew 1.3 percent to $1.15 million in 2012, while annual incentive payments were flat at $2.1 million. For the third year in a row, however, long-term incentives (LTI) increased, growing 3.8 percent to $7 million. In sum, total direct compensation increased a modest 3.6 percent to $10.1 million in 2012."

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Rising Work-Life Balance Concerns Tied to Employee Turnover Worldwide

"More than one in four employees (27 percent) at organizations that are not perceived to support work-life balance plan to leave their companies within the next two years ... That's compared to only 17 percent of those at companies that ranked among the top quartile for support of employees in achieving a reasonable balance between work and personal life. For an organization with 10,000 employees, a 10 percentage point reduction in turnover over two years would result in savings of $17.5 million[.]"

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Lifestyle Benefits Are Becoming More Important to Employees

'The big focus now is on offering people pleasers,' explains Marie Dufresne, a Dallas-based senior principal with Hay Group. She defines these pleasers as offerings that cost the employer little to nothing, but save the employee on something that they would be paying for anyway, or perhaps couldn't quite afford.  MORE >>

How to Keep Your Star Employees

Excerpt: Even if money isn't the best motivator, it still talks. To make a smaller bonus pool go further, fine-tune your timing. Rewards handed out at tough times can have a major impact. It's also smart to rethink your selection process. More companies are paying bonuses to those with hard-to-replace skills instead of just top performers, says Hay Group comp expert Tom McMullen.  MORE >>

Layoff Binge Spurs Severance-Policy Flux

Excerpt: With so many companies laying off workers, revising severance-pay policies is in vogue as well. And while a majority of employers will save money under their new provisions, a sizable minority will not, according to a new survey. Among 180 companies surveyed by Hay Group, a human-resources consultancy, 15% had altered their severance policies in the year before the survey was conducted, around February 1, and an additional 22% said they are considering making changes.

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Top-Hat Plan: Oral Promise May Be Enforceable (PDF)

2 pages. Excerpt: A federal district court recently concluded that an executive may base a claim for top-hat plan benefits on oral, rather than written, misrepresentations. This is notable because the court distinguished top-hat plans from plans that are subject to ERISA's plan document requirement, where the court indicated that oral promises would often be unenforceable. The case is Hay Group, Inc. v. Bassick (N.D. Ill. 2008).  MORE >>

The New IDR Operations Final Rule: What Employer Group Health Plan Fiduciaries Need to Know

"Employer group health plan fiduciaries should continue to monitor IDR activity for their health plans and analyze reporting from their TPAs on IDR disputes involving the plan. Because of the significantly reduced administrative fee, fiduciaries should examine their TPA agreements and make sure the pricing is consistent with the lower amount.... [F]iduciaries should prepare for the new registration requirement, working with their TPAs to ensure timely compliance once the registry becomes available."  MORE >>

Controlled and Affiliated Service Group Rules for Retirement and Cafeteria Plans: An Overview

"[A] foreign-based corporation (or group of individuals) may have wholly owned subsidiaries in other countries that in turn have wholly owned subsidiaries in the U.S., which are in fact part of a controlled group. Most often, these U.S. controlled groups do not have centralized operations and are not even aware that there are other related entities in the U.S. ... Less familiar to many service-type companies are the rules treating affiliated service organizations as a single employer for retirement and cafeteria plan purposes. The ownership thresholds triggering application of these rules are much lower for this type of group than for controlled groups."  MORE >>

Funding Employer-Sponsored Group Health Coverage: The Group Captive Solution

"Group captive-funded medical stop-loss insurance offers a way for smaller employers ... to obtain the full benefit of self-funding.... This Special Report explains what group medical stop-loss captives are and how they are structured and regulated.... [It] includes a discussion of the criteria that an employer might apply to determine whether a group captive solution is appropriate. Then, it offers an overview of the applicable laws, regulations and other considerations ... [and] concludes with some practical recommendations for employers that either currently participate in, or are considering signing on to, a group captive arrangement."

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Controlled and Affiliated Service Group Rules for Retirement and Cafeteria Plans: An Overview

"For plan sponsors with U.S. based operations and exclusively U.S. controlled groups, there is, generally, a healthy awareness of the rules as operations are typically centralized in the U.S. and frequently a single third-party administrator is used for all retirement plans of the controlled group. For foreign based corporations with U.S. subsidiaries ... each company in the U.S. controlled group may have their own retirement plan and cafeteria plan with completely different benefits and separate third-party administrators and none of the parties are aware that a controlled group exists.... The ownership thresholds triggering application of these rules are much lower for [affiliated service groups] than for controlled groups."

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MEWAs and Affiliated Service Groups

"When considering funding options for a group of employers there is a hierarchy of questions to consider: [1] Does the group meet controlled group definition? ... [2] If group does not meet controlled group definition, they are a MEWA. If so: [a] Is there less than 25% common ownership? ... [b] What state law rules apply? [c] Does the plan have to register? [d] If the plan is self-insured, can it even function in that state? [4] Does the group meet affiliated service group rules?"  MORE >>

Text of Agency Proposed Regs: Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage

76 pages. "This notice of proposed rulemaking would, if finalized, amend the 2015 final rules to provide greater flexibility for grandfathered group health plans and issuers of grandfathered group health insurance coverage to make certain changes without causing a loss of grandfather status. However, there is no authority for non-grandfathered plans to become grandfathered, and therefore these proposed rules would not provide any opportunity for a plan or coverage that has lost its grandfather status under the 2015 final rules to regain that status....

"These proposed rules would amend the 2015 final rules in two ways.

• First, these proposed rules include a new paragraph (g)(3) which would specify that grandfathered group health plans and grandfathered group health insurance coverage that are HDHPs may make changes to fixed-amount cost-sharing requirements that would otherwise cause a loss of grandfather status without causing a loss of grandfather status, but only to the extent those changes are necessary to comply with the requirements for HDHPs under section 223(c)(2) of the Code.
• Second, these proposed rules include a revised definition of 'maximum percentage increase' in redesignated paragraph (g)(4), which provides an alternative method of determining that amount based on the premium adjustment percentage. This alternative method would be available only for grandfathered group health plans and grandfathered group health insurance coverage with changes that are effective on or after the effective date of a final rule.

"The Departments request comments on all aspects of these proposed rules. "  MORE >>

Text of Agency Request for Information: Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage

15 pages. "Given the limited information available regarding such coverage, the Department of the Treasury, the [DOL], and [HHS] are issuing this request for information to gather input from the public in order to better understand the challenges that group health plans and group health insurance issuers face in avoiding a loss of grandfathered status, and to determine whether there are opportunities for the Departments to assist such plans and issuers, consistent with the law, in preserving the grandfathered status of group health plans and group health insurance coverage in ways that would benefit employers, employee organizations, plan participants and beneficiaries, and other stakeholders."  MORE >>