Present, Future Both Tense

Survey: Employers worried about medical benefits, employees worried about retirement plans. Meanwhile: Prosecutors in Fastow case need more time, a rare IPO sighting, and Impath CEO resigns over expense flap.


What are the primary benefits concerns of 2003? It all depends on who you ask.

Employers regard the need to control rising health and welfare costs as the top priority for the fourth consecutive year. Meanwhile, employees say retirement and investment issues are the primary benefits concerns in 2003. This according to a survey of employee-benefits specialists conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) and the Human Capital Advisory Services practice of Deloitte & Touche LLP.

“Employee concerns over retirement planning continue to be important as a large percentage of the workforce nears retirement,” explains Mary L. Komornicka, president of ISCEBS. “With the downturn in the economy, many employees have experienced dramatic decreases in their invested retirement savings and are searching for ways to protect and maximize their nest eggs. Indeed, many employees have been forced to reconsider when they will be able to retire.”

Benefits have also emerged as a major issue among companies seeking to control costs in a difficult economic environment.

As we reported last week, benefits costs averaged 39 percent of total payroll costs in 2001 among employers surveyed by The U.S. Chamber of Commerce. That’s an increase from the previous year, when benefits came in at 37.5 percent of payroll. (To see how some companies are controlling medical-benefit costs, see’s special report, “Ill Wind: The Health-Benefits Crisis.”)

Altogether, nearly 86 percent of the 437 employee-benefits specialists surveyed by ISCEBS and D&T identified controlling health and welfare costs among their top five priorities. This was the top priority across all regions, industries, ages, and genders, the survey added.

“This survey finding reemphasizes how critical cost management remains for employers,” notes Richard Kleinert, a principal with Deloitte & Touche’s Human Capital Advisory Services practice.

What was the second most-important benefits issue among employers? Exactly half of the respondents cited compliance with HIPAA and other state and local privacy requirements. Surprising, given that in last year’s survey, privacy concerns did not even rank among the top five priorities.

Rounding out the top benefits issues for employers are expanding the use of employee self-service technology for communications and/or administration (38 percent), evaluating/implementing/expanding the use of Internet/intranet applications (36 percent), and providing financial/retirement planning tools and information (33 percent).

By far the most-important objective driving benefits program policy and design for 2003 is cost management/reduction (67 percent). Other key objectives include employee attraction and retention (12 percent), compliance and fiduciary issues (10 percent), increased use of technology (7 percent), and administrative requirements/alternatives (3 percent).

Employee-benefits specialists identified retirement and investment issues as three of the top five benefits issues for employees in 2003. Evaluating current investment options (64 percent) was rated the top concern, followed by evaluating current levels of retirement savings (61 percent).

The remaining priorities are identifying additional ways to save for retirement (44 percent), learning more about health risks and how to control them (40 percent), and making greater use of Internet tools to manage financial and security programs (36 percent).

Employee Sentiment Sinks

A monthly index that measures employee sentiment fell sharply in January.

The Employee Outlook Index, a joint venture of The Gallup Organization and UBS that was established in April 2002, declined 6 points to 60 in January, and is now close to its August low of 58 and far below its initial baseline of 72.

In fact, all three segments of what the groups call the Employee Outlook Index also declined.

The Future Company Conditions Index dropped 9 points to 61 in January. The Present Company Conditions Index declined 7 points to 77, while the Job Security Index dropped 2 points to 42.

The key issue, of course, is the direction and magnitude of change.

Each month employees who are surveyed are asked an additional question that changes each time.

In the latest survey, employees were asked whether their company conducts periodic formal performance reviews.

Around 80 percent said their company conducts performance evaluations, while just 18 percent reported their company does not perform reviews. Among this group, 52 percent said they are reviewed annually, 27 percent noted they receive a review every six months, and 13 percent said their performance is reviewed monthly or more frequently.

Nearly two-thirds (63 percent) said their supervisor or employer set specific performance goals for them and/or their team in 2002. Among those who said their employer did not set specific goals, 59 percent set specific performance goals for themselves and 41 percent did not.

But only 56 percent of those employees with specific set performance goals said they “completely met” their goals last year. However, another 29 percent said they “came close to meeting” their goals, while just 14 percent indicated they “partially met” or were “unable to meet” their goals.

And what was the reward for meeting their goals? Well, 58 percent of employees who had specific performance goals said they received a bonus or some other kind of special incentive compensation to reward them for their performance.

Other than monetary awards, about 4 out of 10 respondents said workers who met their targets received some other type of recognition, such as a letter of praise or a plaque. In addition, 29 percent said they received neither special compensation nor any other type of recognition, while 26 percent said they got both a financial incentive and another type of recognition.

Sighted: An IPO

Eight is finally enough for the initial public offering market.

Bancshares of Florida Inc. raised $9 million Monday in what is not only the first new issue of the year, but the first one in eight weeks.

This is the lousiest start to a new year since the dog days of 1974, the worst bear market until this one came along.

The IPO market may be about to pick up, however.

Auto insurer Infinity Property and Casualty Corp. and mortgage bank Accredited Home Lenders Holdings Co. plan to launch IPOs on Tuesday, according to Reuters. Infinity hopes to raise $210 million, while Accredited Home is looking to raise $96.5 million.

Bancshares, which sold 900,000 shares for $10 apiece, plans to use part of the proceeds to acquire a trust company.

The near-dead equity calendar contrasts with the delirious debt market. On Monday alone, more than $5 billion worth of high-grade paper was announced, according to Dow Jones.

In February supply totaled $12 billion as of the end of last week, compared with $7 billion in the same period last year, according to Thomson.

What’s more, in January alone, more than $61 billion in U.S. investment-grade debt hit the primary market, compared with $52 billion a year ago, said the wire service, citing Thomson Financial.

The only better month last year was March, when $100 billion hit the primary market.

Breaking from the recent pattern, none of the deals on Monday were jumbo offerings. The largest deal of the day came from Dominion Resources Inc., which issued $700 million of paper in two parts: $400 million in five-year notes and $300 million in two-year notes.

And Merck borrowed $500 million in an offering of medium-term notes.

Fastow’s Trial Delayed

Apparently the paperwork reduction act does not apply to high-profile corporate trials.

On Monday the federal judge overseeing the case against former Enron CFO Andrew Fastow granted a 90-day delay. The reason? Lawyers working for the government reportedly said they still have a huge amount of paperwork to go through.

“There’s no good way to make it simple,” assistant U.S. attorney Andrew Weissmann reportedly said. The paperwork numbers in the “hundreds of thousands of pages,” he added.

A trial date has still not been set and more charges are expected to be filed against Fastow, who in the fall was indicted on 78 counts, including fraud, money-laundering, and conspiracy as part of an alleged scheme to artificially boost earnings and enrich himself.

The next courtroom hearing is scheduled for May 19.

In addition, U.S. District Judge Kenneth Hoyt rejected the prosecution’s request to move the case to U.S. District Judge Melinda Harmon. Harmon presided over the government’s successful obstruction of justice case against Enron auditor Arthur Andersen last summer.

The primary civil lawsuits against several Enron officials, including Fastow, also are in Harmon’s court, according to the Associated Press.

Meanwhile, Judge Hoyt expressed concern that the charges and the trial could become too complicated to litigate.

He said he was concerned the 78-count case, with hundreds of thousands of documents culled from 22 different banks, law firms, and companies, could “create a trial that is unmanageable,” according to Reuters.

And the case would get even more complicated once prosecutors bring the new, added charges against Fastow and other Enron finance executives.

But prosecutor Weissmann reportedly reassured the court: “I don’t think this is so vast that a jury won’t be able to comprehend it.”

Short Takes

  • Impath Inc. named Carter H. Eckert as chairman and CEO, effective immediately, to replace Anu D. Saad. Saad resigned following a review of his expenses submitted during the past three years.

Saad agreed to reimburse the company $250,000. Impath said the review would not result in any restatement of the results for any prior period.

  • Computer Sciences Corp. reported it signed a seven-year subcontract with IBM to support a portion of JPMorgan Chase’s information-technology environment. CSC estimated the value of the subcontract to be about $500 million over the term of the agreement.

CSC currently provides IT services to JPMorgan Chase under a 1996 agreement that expires in July. Under the terms of the new agreement, CSC will continue to manage a portion of the JPMorgan Chase distributed computing data processing environment of approximately 4,000 servers and assist IBM in the implementation of its new IT data processing delivery strategy.

(Editor’s note: To read how some companies are renegotiating better deals with their outsourcers, read Outsourcing: Still a Buyer’s Market.”)

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