Looking back at 2006's top employee benefits newsmakers

Rep. John Boehner

If there were just one person considered to be the father of the Pension Protection Act, most Washington pension observers agree that it would be Rep. John Boehner, R-Ohio.

As chairman of the U.S. House Education and the Workforce Committee, the Ohio Republican launched the reform drive in 2003 with a series of hearings on pension plan underfunding and the threat it posed to the Pension Benefit Guaranty Corp., the federal pension insurance agency.

Rep. Boehner unveiled a reform bill last year to strengthen pension plan funding and spearheaded its passage in his committee and later in the House of Representatives, where his bill picked up significant bipartisan support.

While a loyal Republican, he was not blindly loyal. The funding rules in his bill, for example, were less stringent than those proposed by the Bush administration--a difference that was deliberate.

"Make the rules too harsh and you drive employers out," Rep. Boehner warned.

After his elevation to House majority leader this year, he continued to play a pivotal role in the reform drive. He sought and won membership on the conference committee assembled to craft a compromise from the House bill and a somewhat different measure approved by the Senate.

Rep. Boehner was very much in the thick of things, helping, among other issues, to iron out differences in the two bills concerning how cash balance plans should be protected from age discrimination suits.

His long crusade was successful when conferees agreed on a final bill in late July, with House and Senate approval coming soon after.

The final result, said Rep. Boehner, who in January becomes the House minority leader given Democrats' taking control of Congress, will protect the interests of taxpayers who could have been on the hook for a multibillion dollar bailout of the PBGC had Congress not acted.

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Mayor Richard M. Daley

When Chicago Mayor Richard M. Daley vetoed legislation mandating that major retailers provide a minimum level of wages and benefits, supporters of the so-called "big box" ordinance were confident that the mayoral veto would be overridden.

In July, the city council had approved the measure--on a 35-14 vote--to require retailers with at least 90,000 square feet of space in a single location to pay their employees at least $10 an hour and provide another $3 an hour in benefits.

Supporters had to hold on to 34 votes of the 50-member city council to override the mid-September veto.

But Mayor Daley applied the pressure and supporting votes slipped away.

He warned--at a site of a store proposed by Target Corp., one of the big retailers that would have been affected by the measure--that the bill would harm city neighborhoods most in need of additional economic activity.

Joined by community, business, civic and religious leaders who supported the veto, Mayor Daley said the bill would not generate better wages and benefits for Chicago workers, but instead drive businesses and jobs out of the city to the surrounding suburbs.

As it turned out, Mayor Daley's lobbying campaign proved to be a success. Several council members who had voted for the measure originally switched sides, and the veto override failed on a 31-18 vote.

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Judge Frank Easterbrook

In analyzing whether cash balance pension plans discriminate against older workers, Frank Easterbrook, a judge on the 7th U.S. Circuit Court of Appeals in Chicago, wrote that it all comes down to "inputs"--how much an employer allocates to the accounts of plan participants.

Since cash balance plan benefit formulas are age-neutral--a 50-year-old employee earning $50,000 a year will receive the identical benefit credit as a 30-year-old employee earning the same salary--the plans are not age-discriminatory, Judge Easterbrook wrote.

While a younger employee's account balance will be worth more--expressed as an annuity payable at retirement age--than the balance of an older employee, that difference is solely the result of the younger employee's account balance having more time to earn interest.

In short, treating the time value of money as age discrimination is "not sensible," Judge Easterbrook wrote in overturning a 2003 ruling by a federal judge that had come to the opposite conclusion.

That earlier ruling involving IBM Corp.'s cash balance plan stunned employers and raised the possibility, had the decision been upheld, that all cash balance plans might be considered age-discriminatory, exposing emp-loyers to billions in damages.

The ruling by Judge Easterbrook, a former University of Chicago Law School professor and a federal judge since 1985, makes that possibility much less likely. His ruling, handed down in August, already has been cited by two federal judges in their rejections of age discrimination charges.

How much influence the ruling, which Judge Easterbrook wrote for a unanimous three-judge appeals court panel, has on other appeals courts could be known soon. At least one and possibly two other appeals courts are expected to rule on the cash balance age discrimination next year.

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William W. McGuire

After helping to build UnitedHealth Group Inc. into the nation's second-largest health insurer, Dr. William W. McGuire in October was forced to step down as chairman and chief executive officer of the company--making him one of several high-profile executives to be claimed by wide-ranging regulatory investigations of corporate stock option practices.

His ouster coincided with the release of an outside review of the Minnetonka, Minn.-based insurer's stock option grant program, which found that several option grants awarded to executives over an eight-year period "likely" were backdated, and occurred during Dr. McGuire's watch.

Dr. McGuire was credited with boosting the insurer's revenues to $70 billion from $600 million and guiding the company through numerous and highly successful acquisitions, including its December 2005 purchase of PacifiCare Health Systems Inc.

But the executive, who led UnitedHealth from 1991 until his

departure this year, now faces possible civil and criminal charges by regulators.

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Judge J. Frederick Motz

Maryland's Fair Share Health Care Fund Act would have become law on Jan. 1, 2007, had it not been for U.S. District Judge J. Frederick Motz.

The act, which would have required employers with 10,000 or more employees in the state to spend at least 8% of their payroll on health benefits, was resurrected early in 2006 when Maryland's General Assembly overrode the veto that Gov. Robert Ehrlich had issued at year-end 2005.

Responding to a legal challenge filed in February 2006 by the Retail Industry Leaders Assn., Judge Motz ruled that the measure violates the Employee Retirement Income Security Act.

"The act violates ERISA's fundamental purpose of permitting multistate employers to maintain nationwide health and welfare plans, uniform benefits and permitting uniform national administration," wrote Judge Motz, who was named to the federal court in 1985 by President Ronald Reagan.

Now, the fate of the act remains uncertain as Judge Motz's ruling awaits the outcome of an appeal filed by Maryland Attorney General J. Joseph Curran Jr.

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Gov. Mitt Romney

In 2006, Massachusetts Gov. Mitt Romney accomplished what few thought was possible: working with a state Legislature controlled by the opposite party to enact first of its kind legislation to help the Bay State achieve near-universal health insurance coverage.

The key to success, said Gov. Romney, a Republican, was bipartisan cooperation. "An achievement like this comes around once in a generation, and it proves that government can work when people of both parties reach across the aisle for the common good," Gov. Romney said at the time he signed the legislation.

The foundation of the law is requiring all individuals to have health insurance and redirecting funds used to offset hospitals' costs of treating the uninsured to subsidizing premiums for the low-income uninsured.

With the new law in place, Gov. Romney, widely thought to have presidential ambitions, now is directing the next stage in the health care reform effort: producing regulations to implement the landmark law.

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Gov. Arnold Schwarzenegger

One of the top newsmakers of 2006--California Gov. Arnold Schwarzenegger--almost surely will earn that status in 2007 as well.

This year, Gov. Schwarzenegger made headlines when he vetoed two health care initiatives. One, aimed at retailer Wal-Mart Stores Inc., would have required companies with at least 10,000 employees in the state to spend at least 8% of payroll on health care benefits or pay the difference into a state fund providing coverage to the low-income uninsured. The other measure would have created a state-run single-payer health insurance system.

Gov. Schwarzenegger was especially critical of the latter approach. A single-payer system, he said, would reduce state residents' ability to choose their own physicians, make them wait longer for treatment and raise the cost of the treatment.

But Gov. Schwarzenegger pledged to work toward a new approach to make coverage more available and affordable in 2007. He pledged, while working with state legislators, to develop a legislative package that will support cost containment and recognize the shared responsibility of individuals, employers and the government.

He said last month that the stage is set for comprehensive health care reform, making coverage more affordable and covering more of the uninsured.

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H. Lee Scott Jr.

H. Lee Scott Jr., Wal-Mart Stores Inc.'s president and chief executive officer, announced in September that the Bentonville, Ark.-based retail giant intended to roll back prices on nearly 300 generic drugs to $4.

Though the pricing strategy initially was limited to the Tampa Bay, Fla., area, it quickly spread throughout the country. It also prompted rival retailers, such as Minneapolis-based Target Corp., to lower their prices for generic drugs.

The initiative marked the fourth time since October 2005 that Wal-Mart has moved to improve health benefits. Aside from the generic drug effort, the company relaxed eligibility requirements for part-time workers desiring health insurance and extended coverage to employees' children, introduced a low-cost health plan to make coverage more affordable for its lower-paid workers, and opened in-store clinics to provide low-cost nonemergency care to employees and the public.

"Each day in our pharmacies we see customers struggle with the cost of prescription drugs," said Mr. Scott. "By cutting the cost of many generics to $4, we are helping to ensure that our customers and associates get the medicines they need at a price they can afford."

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Rep. Bill Thomas

When U.S. Rep. Bill Thomas, R-Calif., the outgoing chairman of the House Ways and Means Committee, won committee approval in September for legislation to boost the appeal of health savings accounts, the action seemed more symbolic of his longtime support of HSAs than a serious effort to win congressional approval of the proposal.

That was because the regular session was coming to an end and few thought the proposal could attract enough attention and support to be considered--much less passed--during the brief congressional session that would follow the November elections.

But Rep. Thomas, aided by a big lobbying campaign by employer groups, fought to have the HSA measure included in a so-called tax "extender" bill to be considered during the lame-duck session.

His efforts, which involved some political horse-trading with congressional Democrats who got some of their pet proposals added to the tax bill, were successful when the HSA legislation was included in the broader bill. That bill passed this month.

It was the last political triumph for Rep. Thomas, long known for his intellect and biting wit. Rep. Thomas, who has served as chairman of the Ways and Means Committee since 2001 and played a key role in the drafting and passing of the 2003 law that expanded Medicare to cover prescription drugs, as well as creating HSAs, did not seek re-election and is retiring from Congress.

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Rick Wagoner

A large and growing number of retirees coupled with a generous package of retirement benefits can spell trouble for any company.

But it is especially troubling if that company is in an extremely competitive industry in which many competitors' retirement benefit programs are not as extensive.

That is the situation in which General Motors Corp. finds itself and, as a result, the company has less cash available for product development and capital projects, the big automaker says.

GM Chief Executive Officer Rick Wagoner approved several steps this year to cut the company's retirement costs. Salaried employees hired before Jan. 1, 2001, and covered under a traditional final average pay plan will earn future benefits under a less generous career average pay plan; salaried employees hired on or after Jan. 1, 2001, and covered under a cash balance plan will, effective Jan. 1, 2007, earn retirement benefits through an enhanced 401(k) plan.

The changes, intended to reduce GM's pension obligations by $1.6 billion this year, were needed to save money and reduce risk, Mr. Wagoner said.

GM clearly needs to do that: In 2005 alone it lost a whopping $10.6 billion.