Once upon a time,
retirement wasn’t something that most could
afford. In 1950 nearly 50% of men aged 65 or
older were still working. But the ‘good ‘ol
days’ that followed made retirement a reality
for more and more Americans and by the 80’s only
slightly more than 15% continued working beyond
age 65. That number has risen slightly and today
19% of the 37 million Americans aged 65 or older
continue to work. But the trouble starts next
year when the first of the 78 million ‘boomer’
generation will reach age 62 and start thinking
about retirement. This puts well-know pressures
on our economy. Business will lose access to
valuable human capital, social security and an
increasing number of private pension plans face
insolvency while healthcare costs spiral higher
each year. But the unknown variable in this
formula of doom is retirement itself. The macro
pressures of the boomer retirement wave are
equally great on the individual and continuing
to work may become an option with no good
alternative for an increasing number of workers.
There are fewer household couples in the age
range 55 to 64 due to higher divorce and
separation rates - down to 58% from two-thirds
in 1980. This means that more are ‘on their own’
in retirement. And retirement funds are also
increasingly scarce as fewer and fewer companies
offer pension and retiree healthcare benefits.
So maybe those boomers won’t be leaving quite so
soon after all. For more information on
retirement trends click
here for the Health and Retirement Study by
the University of Michigan.
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More than half of all
tax returns are prepared by someone other than
the tax filers themselves. If you are one of
this majority, you may be in for a higher fee on
your next visit. In May of this year Congress
passed a new law effectively ‘deputizing’ tax
professionals, making them responsible for
filing a form that highlights questionable tax
positions included in a return. Failure to do so
will subject the preparer to stiff penalties.
The preparer must also apply a higher standard
than in the past when determining what issues
are questionable. The new law was not the idea
of the IRS this time but rather originated in
Congress as a means of narrowing what is known
as the ‘tax gap’ or the difference between
reported tax liability and the amount actually
owed by correct and accurate application of the
tax code. This ‘tax gap’ is estimated to be over
$290 billion annually. The new help from tax
preparers has the additional advantage of being
cheap (free) labor at a time when the IRS can’t
get budget busting new head count. Technically,
the new law goes into effect immediately.
However, the IRS plans to start applying it next
year so 2006 returns with extensions will not
face this higher standard of reporting.
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| If you want to help
your employees prepare for retirement, invest in
your presentation to ‘sell’ the benefits of
saving. It would seem intuitively obvious that a
good presentation would improve participation
but every now and then it is reassuring to test
our intuition particularly when a lot is riding
on the outcome. Over the past several decades
Congress has put together many programs designed
to stimulate personal savings for retirement.
Some of these initiatives have been outright
failures but many have been at least marginally
successful. However, the current level of
personal savings still leaves future retirees at
risk. And the problem becomes more acute with
each uptick in the cost of healthcare, private
pension fund failure or proposed solution to the
solvency of social security. To confirm the
obvious, viz., that the sales presentation
itself matters, the St. Louis offices of tax
preparation giant H&R Block designed,
executed and even paid for a study to examine
the impact of presentation on program
participation. They set out to ‘sell’ IRA
participation to tax filers using alternative
levels of presentation and matching contribution
incentives. The results concluded that the
presentation of the benefits mattered as much or
more than the incentive itself. So even without
further enhancements to existing incentive
programs, employers can help their employees by
better ‘selling’ existing savings programs. Click
here for a complete report of the study and
results. |
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FMLA – THE BASICS ON HOW TO
COMPLY
Q. When is an
employee eligible to take a leave of absence
under the Family Medical Leave Act?
A. First of all, the employee must work
for a company that is governed by FMLA
regulations. All public employers, regardless of
size, and private employers with 50 or more
employees (within a 75 mile radius), are covered
under the law. Any employee on the payroll for
20 or more calendar workweeks in the current or
preceding year’s calendar year counts toward the
50-employee threshold. Secondly, the employee
must have worked for the company for at least 12
months and have worked at least 1250 hours over
the previous 12-month period (approximately 24
hours per week).
Q. For what reasons
can an eligible employee take a FMLA leave of
absence?
A. A
leave may be granted for:
- the birth of a child and to care for the
newborn child or for the placement of a child
for adoption or foster care
- the employee’s serious health condition
- caring for an immediate family member
(spouse, child, or parent) if that family member
has a serious health
condition
Q. What is considered
a serious health condition?
A. A
serious health condition is defined as an
illness, injury, impairment, or physical or
mental condition that involves:
- Inpatient care – an overnight stay in a
hospital, hospice, or residential medical-care
facility and any resulting period of incapacity
and treatment.
- Continuing treatment – is defined as one or
more of the following:
- A period of incapacity involving two or more
treatments by a health care provider or
treatment by a health care provider on one
occasion resulting in a continuing regimen or
treatment.
- Any period of incapacity due to pregnancy or
for prenatal care.
- A period of incapacity because of a chronic
serious health condition requiring periodic
visits for treatment, continuing for an extended
period, and may be episodic rather than a
continuing period of incapacity. (Examples
include asthma, diabetes, and epilepsy).
- Permanent/ long-term conditions requiring
supervision for which active treatment may be
ineffective, but continuing supervision is
needed. (Examples include Alzheimer’s, a severe
stroke, or the terminal stages of a disease).
- Multiple treatments for non-chronic
conditions, a condition that would result in
absence of more than three consecutive calendar
days if left untreated. (Examples include
chemotherapy for cancer, physical therapy for
severe arthritis, dialysis for kidney disease,
back conditions requiring extensive therapy or
surgery, heart attacks, pneumonia, and
miscarriage).
Q. How
long of a leave is an employee entitled to under
FMLA?
A. An eligible employee may
take up to 12 weeks off unpaid within a 12-month
period. This leave can also be taken
intermittently – in increments of a few days or
even a few hours.
Q. How should an
employer define this 12-month period?
A. An employer can define a 12-month
period as the calendar year, any fixed 12-month
leave year, or a rolling period. Employers must
designate their method of defining the 12-month
period and uniformly apply it to all employees.
If an employer does not select a 12-month
period, the employee can select whichever method
is the most beneficial to them. The rolling
period would not allow an employee to take 12
weeks of leave at the end of one 12-month period
and 12 weeks at the beginning of the next
12-month period.
Q. How should an
employer administer an intermittent leave?
A. An employee may take leave
intermittently, or on a reduced leave schedule
to care for an immediate family member with a
serious health condition or because of a serious
health condition of the employee when medically
necessary. An employee may take leave
intermittently, or on a reduced leave schedule
for child-care only with the employer’s consent
– this is not required that the employer must
allow. A few conditions/requirements are as
follows:
- Employees must make reasonable arrangements
in advance to avoid needless disruption of the
employer’s operations.
- Employers may deduct from employees’
salaries for time taken for intermittent or
reduced schedule FMLA leave. These deductions do
not affect an employee’s exempt status under the
Fair Labor Standards Act.
- Employers may assign employees taking
intermittent or reduced-schedule leave to an
alternative position with equivalent pay and
benefits that better accommodates the employee’s
intermittent leave or reduced
schedule.
Coming next month –
more frequently asked questions about FMLA
compliance! |
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U.S. retailers are
starting to get smart. Their long-time model is
broken and has been for decades. It is a simple
model. Basically, it goes like this: Forecast
demand and then buy twice as much as you think
will sell just to make sure you don’t run out of
high demand items. Then drop the bottom out of
prices only a few weeks into a season to get rid
of all that inventory. As more and more
production moved ‘off shore’ in search of third
world cost savings, this model became
increasingly necessary. Long lead-times to
deliver the manufactured product meant
purchasing decisions couldn’t be changed. The
result of this model has been to train the
American consumer to anticipate short-lived
initial prices followed shortly by discounts of
up to 50%.
Meanwhile, across the
Atlantic the model was changed by a couple of
major apparel companies. They shifted the
emphasis from volume to margin. This required
the ability to respond quickly to retail demand.
To do this they moved production closer to home
even if it meant paying more for production.
Using technology to provide literally
up-to-the-minute sales and inventory status
information, they were able to replenish stock
in 80% less time. With lean inventories and
quick response times pricing could be maintained
down to the very end of the season. Inventory
was just ‘sold out’ for popular items and
discounts reserved for only the slowest moving
products. This lean inventory, quick response
model is estimated to improve retail
profitability by more than 60% according to
studies by Professor Gerald P. Cachon, of
Wharton. American manufacturers are now
struggling to transition into the new model. But
the retailer must then meet the challenge of
retraining the American consumer who currently
expects to see those prices start dropping only
a few weeks into a season. |
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It seems we just can’t
beat the rising cost of government health care
programs - push them down one place and they
just pop up somewhere else. The federal agency
that oversees the Medicaid program has now
issued a new rule intended to reduce the cost of
prescription drugs. The current method of
reimbursement was found to pay pharmacies more
than the actual cost of certain generic drugs
based upon studies in 2004. The new lower
reimbursement approach is forecast to save $8.4
billion over 5 years. Sounds good doesn’t it.
But now the Government Accountability Office
(GAO) says that the new plan will pay pharmacies
36% less than the actual cost of drugs dispensed
to Medicaid beneficiaries. In other words a
pharmacy will lose money on every Medicaid
prescription filled. Industry sources predict
that community pharmacies, which average 23% of
their revenues from Medicaid, will quickly go
out of business under the new rule. However,
there is another component of the cost formula,
viz., the cost of dispensing a prescription. The
accounting firm Grant Thornton estimates that
the average cost of dispensing a prescription is
$11.35 nationally according to the Wall
Street Journal and many state Medicaid
programs currently reimburse less than half this
amount. To keep the community pharmacies in
business some states are proposing to use the
new cost savings to increase what is known as
the ‘dispensing fee’ paid to pharmacies for each
prescription filled under the program. Of
course, CMS must approve any change in state
dispensing fees and the current proposals would
wipe out the savings realized by the new reduced
drug reimbursements. MORE
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| Current
Economic
Indicators |
| Illinois
Chamber
HR Helpline |
| Knowing what you can
and can't do will help you prevent costly
mistakes. Call our staff of HR experts. Let Pam
Holleman help you deal with problems safely and
avoid disputes. You can reach the Helpline
toll-free at 800-322-4722. |
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| Your membership in the
Illinois Chamber pays! We offer valuable
programs and services to our members at special
discounts. Click
here for our growing list of outstanding
seminars, workshops and programs that will help
you with your everyday business needs.
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 The Chamber
urges all Illinois employers to recognize their
Guard and Reserve employees by signing and
displaying the ESGR Statement of Support. To get
yours, simply complete an online
form and you will receive a personalized
certificate that demonstrates your support. Click
here for answers to Frequently Asked Questions
(FAQ's) for employers and reservists. Also
visit the SBA Veteran's Business Development web
site for assistance to small business owners
that have employees activated in the Guard or
Reserves. Click MORE
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The
Exec Report - Copyright © 2007 The Illinois
Chamber
Wood
S. McComb, Editor
Debra
McCarver, Director of Communications
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