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The BenefitsLink Newsletter -
Welfare Plans Edition
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July 18, 2002 - 6,490 subscribers
Today's sponsor: EBIA's COBRA: The Developing Law

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(Help BenefitsLink to provide this newsletter at no charge to you -- our sponsors pay our way. Remember to visit them periodically; we try to make sure their products and services will be of interest to you. Thanks! --Editor)

Congressman Questions Polaroid Purchaser's Discontinuance of Health Benefits for the Disabled
Excerpt: "Polaroid, in a July 2 letter, said that One Equity Partners, the bank's venture capital unit, would not hire the disabled employees. 'Consequently, as of the date of the closing expected in late July 2002, you will be terminated from Polaroid Corp. and your group medical, dental and life insurance benefits will end,' the letter states." (The Boston Globe)

Plan to Import Drugs From Canada Passes in Senate
Excerpt: "The Senate [on Wednesday, July 17, 2002] approved a proposal that could make it easier for Americans to import prescription drugs from Canada, where drug prices are often lower than in the United States. But the Bush administration said it would not carry out the plan because it would endanger public health." (New York Times; free registration required)

Massachusetts OKs High-Deductible Medical Plan from Blue Cross and Blue Shield
Excerpt: "Blue Cross and Blue Shield of Massachusetts, the state's largest health insurer, won approval from state regulators last week to allow area employers to shift more health care costs to employees.... The plan is expected to cost employers 15 to 40 percent less than the insurance company's standard HMO plan, but employees will have to pay annual deductibles ranging from $1,000 to $5,000 before their coverage will kick in." (Boston Globe)

Outline of Possible Methods for Addressing the Erie County Ruling on Retiree Health Benefits (PDF)
Excerpt: "We understand that the EEOC is actively working on a proposal to provide guidance to plan sponsors on how the Age Discrimination in Employment Act (ADEA) applies to employer-sponsored retiree health benefit plans.... The work group has outlined six possible approaches that could be used [by the Equal Employment Opportunity Commission] as 'safe harbor' methods for meeting nondiscrimination-testing requirements under EEOC guidelines for retiree health care plans." (American Academy of Actuaries)

Overview: CMS Establishes Employer ID for HIPAA EDI Transactions
Excerpt: "Although employers are not required to disclose their EIN to a health plan or other covered entity (because they are not subject to the HIPAA EDI rules), there is a strong incentive for them to continue the common business practice of providing an EIN voluntarily in order to transmit enrollment information to an insurer or other health plan." (The Segal Company)

California Employers, Co-Workers Adjust When Employees Take Extended Leave
Excerpt: "There are at least 17 federal and state laws concerning time off work, governing a variety of circumstances. They become the wild cards that test a business's resources and preparedness. The leaves come in many forms and for many reasons, including: ..." (Modesto [Calif.] Bee via Society for Human Resource Management)

Delta Airlines Offers Business Literacy Courses to Employees
Excerpt: "[HR planner Fred Turner] and 50 other Delta employees sat down to learn their business -- how the company brings in revenue and how costs suck it out. These business literacy classes, which are voluntary and began in May, come as Delta and other airlines are reporting the largest losses in their history." (The Atlanta Journal-Constitution via Society for Human Resource Management)

Las Vegas Casino Opens Medical Clinic for Employees, Families
Excerpt: "The medical center is open to the public, but Palms workers and their families have their own waiting room and are given priority when visiting the doctor.... 'The medical center is another nice benefit for our employees,' [owner George Maloof] said. 'They'll save a little money on their co-pays, but because it's right next to the Palms [casino], the convenience is great." (Las Vegas Review-Journal via Society for Human Resource Management)

Businesses Explore How Health-Insurance Costs Can Help Meet Strategic Goals
Excerpt: "Businesses are using at least two new yardsticks to measure the effectiveness of health insurance: For one, they want to know which benefits result in the most productive workers. And two, they want to manage the delivery of medical care so that it produces the most cost-effective results." (The Dallas Morning News via International Foundation of Employee Benefit Plans)

Commentary: Crafting a Health Care Tax Credit in the Trade Bill
Excerpt: "Both bills provide health care assistance to displaced workers using a refundable tax credit structure. However, although both bills incorporate similar financing structures, they differ in the implementation of the credits." (The Heritage Foundation)

Actuaries Comment on Proposed Genetic Discrimination Model Act (PDF)
Excerpt: "On behalf of the American Academy of Actuaries' (Academy) Life Products Committee, I appreciate the opportunity to provide comments on the proposed Genetic Discrimination Model Act. I hope that these comments will be helpful as the National Conference of Insurance Legislators (NCOIL) Life Committee considers the proposal." (American Academy of Actuaries)

Health Promotion Programs Gain in Popularity
Excerpt: "Spurred by rising healthcare costs, an unprecedented number of US companies are offering health promotion and management programs to their employees, according to a new study by benefits consulting giant Hewitt Associates." (Reuters via Medscape; free registration required)

Georgia HMO Reforms Appear to Be Working
Excerpt: "In the three years since the General Assembly approved the overhaul of health-maintenance organizations spearheaded by Gov. Roy Barnes, not a single lawsuit has been filed arising from a coverage appeal.... The reforms made Georgia among the first states in the nation to give patients the right to appeal adverse coverage decisions to an independent-review panel. Now, 42 states and the District of Columbia offer external review." (The [Jacksonville] Florida Times-Union)



Links to Items on Executive Comp, Benefits in General
(These items appear in both editions of the BenefitsLink Newsletter)

Opinion: Business 'Reforms' Should Not Ignore Incentives and Competition
Excerpt: "Take the idea, pushed by Senator John McCain, the Arizona Republican, and others, that executives shouldn't be able to sell their stock until they've left the company. Rather than encourage sound management that builds good companies, that would actually punish long-term commitments." (New York Times; free registration required)

New Study by Economists Questions Ability of Market Forces to Regulate CEO Pay in Corporate America
Excerpt: "The key assumption of the [prevailing optimal-contracting theory] is that managers and shareholders, in effect, negotiate at arm's length over pay. Basic training in economics is needed to blind one to the absurdity of this assumption. Top managers direct or at the very least influence the board members who set their pay: that means they will succeed in collecting some rent. The only question is how much." (The Economist)

Confusion About Distribution of Stock Options Among Employees Who Are Not Executives
Excerpt: "Campaigning against legislation that would force companies to account for the cost of stock options, corporate executives, lobbyists and sympathetic lawmakers have proclaimed options to be a pillar of the middle class. In reality, however, the defenders appear to have greatly exaggerated the spread of options." (New York Times; free registration required)

Global Accounting Group Pushes Hard for Stock Options Expensing
Excerpt: "A day after the Senate sidestepped a vote on stock-option accounting, an international accounting group took a significant step toward adopting a standard that would treat employee options as an expense. At a meeting in London [on July 16, 2002], the International Accounting Standards Board gave its go-ahead to create a so-called exposure draft that would form the basis for recognizing stock options in financial statements." (Dow Jones via Yahoo! News)

Opinion: Stock Options for Rank-and-File Employees Are Worth Defending
Excerpt: "As the anti-options steamroller gains momentum, it's worth taking some time to dig into the details ... [I]f Congress isn't careful about those details, it could end up crippling the socially useful role of stock options as a wealth-sharing tool -- while leaving CEOs free to continue to rake in unconscionable sums of money." (Salon.com)

Opinion: the Real Stock Options Problem is Dilution
Excerpt: "So should stock options be treated as normal compensation and expensed accordingly? Of course they should. That was easy. But it's also missing the point. Expensing stock options, as Coca-Cola and a small group of other companies now say they will do, will lower reported earnings. That, however, amounts to just a bookkeeping change. Where options absolutely do matter is in their dilutive effect." (CNNmoney)

Expensing Options Probably Won't Hurt Most Firms, Experts Say
Excerpt: "A study by last year by business school professors at the University of California at Los Angeles and Stanford found that while investors view stock-based compensation as an expense, the effects on valuation are frequently offset by expectations that the incentive provided by options will serve as a catalyst for future earnings growth." (Chicago Tribune via International Foundation of Employee Benefit Plans)

Employee Ownership Update for July 16, 2002: the Outlook for Stock Option Accounting
NCEO executive director Corey Rosen discusses the Senate's accounting reform bill, moves by companies such as Coca-Cola to expense stock options, the pressure for companies to expense stock options, and the outlook for broad-based programs for employees. (National Center for Employee Ownership)

Opinion: Massive Option Grants May Not Spur Massive Fraud
Excerpt: "Many pundits have identified stock options, and particularly excessively large option grants, as the root cause of all the unethical behavior we have witnessed among chief executive officers in recent months.... [A]fter looking at all the names on the top 10 list, it would be hard to draw a solid conclusion that exceedingly large stock option grants corrupt a person's moral character." (Graef Crystal on Bloomberg.com)

SEC: Shareholder Proposals on Executive Equity Compensation Plans No Longer 'Ordinary Business'
Division of Corporation Finance: Staff Legal Bulletin No. 14A. Excerpt: "We believe that the public debate regarding shareholder approval of equity compensation plans has become significant in recent months. Consequently, in view of the widespread public debate regarding shareholder approval of equity compensation plans and consistent with our historical analysis of the 'ordinary business' exclusion, we are modifying our treatment of [shareholder] proposals relating to this topic." (Securities and Exchange Commission)

Commentary: Accounting for Accuracy, Coke is It
Excerpt: "Coke broke ranks with most of corporate America and announced it would begin counting executive and employee stock options as an expense, starting in the fourth quarter. For such a large, well-known and respected company to make this move voluntarily torpedoes the anti-expensing forces who have long said such accounting would be impossible or disastrous." (The [Philadelphia] Inquirer)

Senate Reform Bill Sidesteps Stock Options
Excerpt: "option expensing -- the monster in the attic of America's house of corporate scandal -- was conspicuously ignored in an otherwise sweeping corporate reforms bill passed by the Senate on Monday. Fierce debate erupted off and on for days on the floor, but in the end, opponents blocked a move to force a Senate reckoning on how companies account for the controversial executive perk." (Reuters)

Washington Post Co. To Treat Stock Options As Expenses
Excerpt: "One day after a similar announcement by Coca-Cola Co., Washington Post Co. said it will treat employee options as an expense the next time the company issues options." (Wall Street Journal via MSNBC.com)




Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Extraordinary & Fun Defined Benefit Consulting Opportunities in So. Calif. for Louis Kravitz & Associates, Inc.
in CA
Relationship Manager, Business Development for Transamerica
in CA
Retirement Services Internal Wholesaler for Transamerica
in CA
Employee Benefits Attorney/Writer/Speaker for Employee Benefits Institute of America LLC (EBIA)
in WA
Plan Analyst for CIGNA Retirement and Investment Services
in CT
Senior Retirement Specialist for US Airways
in VA
DC Compliance and Consulting Manager for Putnam Investments - Norwood MA
in MA
Health and Welfare Consultant / Sr. Manager for Ernst & Young LLP
in DC, MD, PA, VA
Associate - Insurance Services - Los Angeles, CA and Deerfield, IL for Mullin Consulting, Inc.
in CA, IL
Financial Analyst - Los Angeles, CA and Deerfield, IL for Mullin Consulting, Inc.
in CA, IL
Benefits Attorney for Stanton Hughes Diana Cerra Mariani & Margello P.C.
in NJ
Institutional Investment Sales Guru for Fifth Third Bank
in IL, IN
Qualified Plan Director for Manulife Wood Logan
in CT
Health and Welfare Project Manager for Towers Perrin
in NJ, PA
Sr. Benefits Account Manager for Wonderful Insurance Brokerage in Los Gatos, CA
in CA
Benefits Analyst for GKN Automotive, Inc.
in MI



Newly Posted Webcasts (Post Yours!)
John Q Goes to Washington: Health Policy Issues in Popular Culture on July 16, 2002
presented by Kaiser Family Foundation



Newly Posted Conferences (Post Yours!)
Prototype Plan Workshop - ONE DAY ONLY!in CO on August 21, 2002
presented by SunGard Corbel
Health Care Cost Containment Seminarin CA on July 25, 2002
presented by ArlenGroup



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Editor and Publisher: David Rhett Baker, J.D.