We want our employees to make healthy choices so that they will have long and healthy lives (and also to decrease the cost of health benefits). We also want our employees to participate in the 401(k) plan so that they can build a nest egg for retirement and enjoy those long, healthy lives (and maybe also so that we don’t have to refund deferrals to our HCEs). Whatever our motivations, it seems that the latest trend in encouraging desired behavior in the employee benefits arena is gamification. Think “Farmville” except the “crops” that your employees will be growing are their dreams that they want to harvest in retirement (travel, a vacation home, or just being able to continue to pay the bills). Imagine those crops wilting unless they are “watered” and “fed” by employees who earn “plant food” and “water” by correctly answering retirement-related questions. Maybe the game could even show the field of dreams wilting at current deferral levels but encourage employees to use a retirement cost calculator to determine what level of deferrals might lead to a successful harvest in retirement. For your employees who are not particularly motivated by watching crops grow, think “Angry Birds” as part of your wellness program except employees may be able to earn “birds” to fling at the infuriating “pigs” in their lives (smoking, obesity, you name it) by correctly answering health-related questions. These particular game examples would, of course, be rife with intellectual property concerns, but you get the picture.
Recent articles describe how benefit consultants and wellness plan providers have begun to design “serious games” that utilize gamification and game mechanics to help employers to educate and motivate their work force with respect to retirement benefits and wellness programs. Some of the games described in these articles provide intrinsic motivation while others allow employees to win prizes and compare scores online. Other games send employees searching through HR communications searching for embedded codes to earn points that will hopefully be found while diligently reading an SPD or other ERISA disclosure document. You may think that these strategies would be aimed primarily at the younger members of your work force but according to Adam Wootton, director of social media and games at Towers Watson in New York, the fastest-growing segment of social gamers is women over the age of 45.
Although this may well be the wave of the future and an effective way to encourage employees to become more educated and involved with their employee benefits we think that there are questions that should be answered by employers before implementing this sort of program. For example, will game play be permitted at work? What if an employee does not have computer access or a smart phone? Will that employee be given some other way of competing for prizes, discounts or other rewards that may be offered? Rules applicable to wellness programs should be considered. In addition, employers should also be sure that they are not inadvertently providing “investment advice” that could jeopardize ERISA 404(c) relief for plan fiduciaries or otherwise result in fiduciary liability. Finally, these games should, of course supplement required ERISA disclosure documents and not try to replace them.
If you think that these strategies will appeal to your workforce and you have considered and resolved potential issues, then let the games begin!
What do you think? Could serious gaming be a missing link in curbing the obesity epidemic in our country or helping employees to prepare for retirement? Or is it for the birds? (angry or otherwise)
After a long lockout, the NHL will begin its season this weekend thanks, in part, to a pension plan. Among the sticking points for the players, as noted in this article, was the desire to return to a defined benefit pension plan. The NHL was somewhat ahead of its time in 1986 when it switched to a DC-only style retirement plan. However, the players in this recent round of bargaining pushed hard for a pension plan, and succeeded. While the NHL has not released very many details about the pension plan, and some of the information we’ve found is conflicting, this report from CSN Washington suggests that players can be eligible for the maximum benefits permitted by law.
While it is interesting to see an institution as prominent as the NHL buck a clear trend in the retirement space, it goes without saying that this is probably not the beginning of a sea change in retirement benefits back to defined benefit plans. As noted in this Globe and Mail article, even Kevin Westgarth, a Los Angeles Kings forward and a member of the NHLPA’s bargaining committee, called moving to a pension plan “way out of style.” .
While pensions may be way out of style for most of us non-athletes, as noted in this article from Bankrate.com, many U.S. professional sports organizations actually offer some kind of pension plan for their players (we’ve previously discussed the pension plans for MLB players here). So the NHL was actually a bit out of step with the rest of its sports brethren (as the Globe and Mail article also suggests). Therefore, in the NHL’s case, this isn’t so much bucking a trend, really a return to an industry standard, in a sense.
Interestingly, many of the arguments that were advanced in support of a pension plan for the NHL players, while somewhat paternalistic, could nevertheless be made for rank and file employees of most other industries as well. Essentially, they boil down to the advantages of lifetime income protection. However, in the current environment (outside of professional sports), we think the more likely move for plan sponsors will be to lifetime income options in defined contribution plans, rather than a return to defined benefit plans. What do you think?
If you’re reading this, it must mean the Mayans were wrong, so since the world is continuing, why not check out our list of recent News & Notes items?
- A recent study by the International Foundation of Employee Benefit Plans found that 84% of employers plan to keep offering coverage in 2014.
- But even if its offered, an Employee Benefits Research Institute study found some employees might not take it if it Congress decides to tax insurance as part of the fiscal cliff negotiations (if you can call them that).
- The Commonwealth Fund has put together an interactive map, and additional information, about various States’ decisions on implementing the PPACA exchanges.
- Since we have so often talked about Hurricane Sandy relief in this column, we would be remiss if we did not point out the additional chart and FAQs that the IRS has released. These are included, among other items, in the most recent IRS Retirement News for Employers, as well.
- We have noted that employers are considering private exchanges and some of the issues around that. This Employee Benefits News guest post suggests that a private exchange might not make the best economic sense. Do you agree?
- Finally, in honor of the holiday season, we all know that co-workers sometimes push the boundaries of appropriate gift-giving. We promise not to give you a harpoon. Merry Christmas and Happy Holidays!
Below is our most recent list of News & Notes from the week that was. Let us know what you think. Should we continue this feature?
- New York City is considering using the city’s public pension funds to finance housing for those displaced by Hurricane Sandy.
- A recent New York Life study confirms our thinking that, when it comes to retirement saving, people tend to take the path of least resistance.
- Continuing with our unplanned New York theme, the New York Times recently reported how some non-traditional medical practitioners were lobbying to be included as “essential health benefits” under health care reform. Is acupuncture essential?
- Going completely to the other coast, CBS Los Angeles reported that LA County officials were scrambling to retain “paying patients” ahead of 2014.
- Apparently, defined contribution plan fees were at a record low in 2012. Do you think fee disclosure had anything to do with that?
- Finally, can you imagine buying health insurance at the grocery store? That may happen in the future, says this Kaiser Health News report. Seeing the premium quotes might make us think twice about some of our purchases (Twinkies are healthy, right?).
Now that we’ve returned from Thanksgiving and have finished off the leftover pumpkin pie, we wanted to share a few more recent benefits-related(ish) stories and other links.
- The most recent issue of the IRS Employee Plans News is out, including information on an upcoming IRS phone forum on Hurricane Sandy relief.
- In case you didn’t see it, last week the DOL issued compliance guidance for employee benefit plans in wake of Hurricane Sandy.
- This blog post lists four ways to internally market your benefits and compensation programs.
- One way you might help participation in your wellness programs is develop an app, says this article.
- Are you having trouble keeping track of all the lawsuits about the PPACA contraceptive mandate? Fortunately for you, Politico has a good summary.
- Some other countries provide some interesting benefits, as detailed in this article. Which ones would you like to see replicated in the US?
Just as we did last week, below, we share some recent benefits-related(ish) stories and other links.
- Today would have been the deadline for states to submit their PPACA health insurance exchange blueprints, but HHS extended the deadline for the blueprints and then, a few days later, extended the deadline for states to tell HHS if they were starting an exchange. As these reports from Kaiser show, some states are in and some states are out. State Refor(u)m is keeping a list of state responses here.
- The IRS released the latest edition of the Employee Plans News with some helpful information about plan administrative issues.
- InvestmentNews reports that 401(k) plans rode out the Great Recession just fine, thank you very much.
- The New York Times recently featured one company that is offering income for life through its 401(k) plan. Is this something you’re considering?
- We shared previously about some actions the federal government may take to address the fiscal cliff, but this article talks about what states are doing.
- This Wall Street Journal article shares some innovative weight loss technologies employers are using to curb health care costs.
As a new feature here on BenefitsBryanCave.com, we are going to regularly share some recent benefits-related(ish) stories and other links.
- The IRS is encouraging donations of unused leave to help Hurricane Sandy victims. A more complete list of Hurricane Sandy-related IRS news is also available here. The PBGC also has a list of disaster relief announcements and Medicare has extended enrollment for those impacted by Sandy.
- Get out your flotation devices because Politico is predicting a post-election flood of health care reform guidance.
- Several states had PPACA measures on the ballot. You can check out this list of the measures, and how they fared on election night.
- Speaking of health care and elections, this Washington Post article says many employees are overwhelmed by open enrollment.
- And just when you thought we were done with PPACA litigation, the Obama administration has said it does not have a problem with the Supreme Court allowing Liberty University’s challenge to PPACA to be reviewed at the Fourth Circuit.
- A Plan Sponsor Council of America study showed that participant fee disclosure did not significantly change participant behavior, but it did change the behavior of some plan sponsors.
- Do you think you know your facts about health care? Take this short LA Times quiz and see how your score.
Everybody knows that everybody likes sports. According to the Sports Business Journal, employers are parleying their ties to sports teams, leagues and events into employee benefits. Internal marketing of a company’s sports sponsorship can boost morale, provide perquisites, enhance recruiting and publicize corporate philanthropy
For example, according to the Sports Business Journal, Discover Financial Services, an official sponsor of the National Hockey League, was able to display the Stanley Cup in its suburban Chicago headquarters for a half-day after the Blackhawks won the Stanley Cup in 2010. Workers were welcome to pay a visit to have a look and even have their pictures taken with the trophy. This year, the Cup was displayed in Discover’s New Castle, Del. office as a reward for winning an internal call center contest.
Other examples include pre-game hospitality sessions, free or discounted game tickets and discounted team merchandise, either as special rewards for exemplary performance or for general availability to employees.
OMG! Can you inadvertently create a taxable fringe benefit under the Internal Revenue Code or an employee welfare benefit plan subject to ERISA’s reporting and disclosure requirements by providing these sports perks to employees? On the tax question, occasional parties and occasional tickets to sporting events are generally treated as non-taxable de minimis fringe benefits under section 132 of the Code. On the ERISA question, there is no direct guidance in the governing regulations; however holiday gifts such as turkeys or hams are not included in the definition and it appears that the smaller and more occasional the employee reward, the less likely that the Department of Labor will assert that it constitutes an employee benefit plan subject to ERISA. Likewise, the sky is not the limit. If the perks are given too often or the value is too high (think season tickets or Oprah’s iPad giveaway), they will not qualify as de minimis fringe benefits, they will be subject to income and payroll taxes, they may constitute an ERISA employee benefits plan, and they may make the company look silly to employees.
Please share your thoughts and experience on this subject.
On May 18th, two famous, photogenic Olympians found themselves almost $300 million richer. A banner day for anyone, and yet they may have felt at least a twinge of regret. Why? They contend that 409A should have made them much richer, to the tune of as much as $1.2 billion.
At this point, Hollywood has made the story almost old-hat. In December 2002, then Harvard students Tyler and Cameron Winklevoss had an idea. They would develop a web site that connected Harvard students. If successful, they would expand the concept to other campuses. In November of 2003, after several false starts, the Winklevoss twins retained the services of a young, talented programmer to implement their vision. Three months later, without the knowledge of the Winklevoss twins, Mark Zuckerberg gave birth to Facebook. After a successful run at Harvard, the social networking site spread to other campuses, and then took over the world.
In 2004, the Winklevoss twins (and their company ConnectU) filed suit against Facebook, claiming that Mark Zuckerberg had copied their social networking ideas and source code and used them to create Facebook. In 2008, the parties settled, reportedly for $65 million – $20 million in cash and a specified number of shares of Facebook. The problem was the valuation of Facebook stock at the time of the settlement.
Around the time of the settlement, Microsoft made an investment in Facebook. This investment valued Facebook at $15 billion. The Winklevoss twins apparently used this valuation, with a per share price of $35.90, when determining that the number of shares provided as part of the settlement.
How does 409A come in to this story? Like many illiquid startup firms, Facebook made substantial option grants to its employees. For an option to be exempt from Code Section 409A, the option must be granted with an exercise price no less than the fair market value of the underlying stock on the date of grant. Most private start-up companies, particularly ones growing very quickly, regularly engage experienced valuation firm to establish the Company’s fair market value for 409A option grant purposes. Facebook was no exception. In fact, Facebook had come up with an $8.88 per share 409A valuation shortly before the settlement.
After learning of the 409A valuation, the Winklevoss twins sought to invalidate the settlement agreement. Among other things, the twins argued that Facebook’s failure to disclose the $8.88 409A valuation constituted fraud. Had Facebook disclosed the 409A valuation and had that valuation been used in the settlement, the twins would have ended up with more than four times the number of shares they actually received.
Ultimately, the twins lost their appeal to invalidate the settlement, which, after Facebook’s recent IPO, left them with stock purportedly worth around $300 million. Had they used the 409A valuation at settlement, however, their settlement stock could have been worth as much as $1.2 billion.
What’s the moral of this story? Private company stock valuations are inherently speculative, and can be appropriated for purposes other than that for which they are intended. For private companies that issue stock options, 409A can create a paper trail of valuations that can at least raise issues for potential investors, employees, and litigants. Prudence may dictate that companies clearly qualify the limited purpose for which a 409A valuation is obtained (i.e., compliance with 409A). Further, it may be advisable to include confidentiality provisions in stock option agreements and to take such other measures as are necessary to keep private company 409A valuations … well, private.
I get a lot of clients, family members, friends, acquaintances, and random strangers who find out I’m a lawyer asking me what I think is going to happen to the health reform law when the lower court decisions are reviewed by the Supreme Court. Fortunately, unlike the various real estate, estate planning, or tort questions I get asked (mostly by family), this is a subject that I actually know a little about.(1) I am not a Constitutional Law expert, but it was one of my favorite classes in law school.
My personal opinion is that I do not think it or any part of it will be struck down. Others disagree, but they are forgetting that health reform has everything to do with growing wheat.(2)
Back in the 1930’s, FDR kept pushing New Deal reforms through Congress. When the laws were challenged before the Supreme Court, the Supreme Court struck many of them down on the grounds that Congress did not have the authority to enact such laws. FDR threatened to increase the size of the Supreme Court(3) and nominate friendly justices who would uphold the reforms and magically we received Wickard v. Filburn.(4)
In Wickard, an Ohio farmer, Roscoe Filburn, was challenging part of the Agriculture Adjustment Act of 1938.(5) The Act purported to regulate how much of Roscoe’s farm could be devoted to wheat production. Roscoe planted and harvested significantly more than he was allotted under the Act. He argued that the additional wheat was for his personal use and to feed his livestock. Therefore, he said, this extra wheat growth was merely local in nature and therefore was not part of the “commerce among the several States”(6) that is subject to Congressional regulation.
The Court in Wickard essentially did away with any prior distinction of local versus interstate activities by pointing out the aggregate effect on interstate commerce that even “local” activities had. This aggregate effect analysis was novel in Commerce Clause analysis and constituted a radical expansion, at the time, of Congressional Commerce Clause authority.(7) From the time of Wickard forward, the Supreme Court has not interpreted the Commerce Clause as imposing any substantial limit on Congress’s authority to regulate economic activity.
So what does this have to do with health reform? Some of the arguments advanced by opponents to the law essentially state that Congress cannot regulate the purchase of health insurance by individuals and, specifically, cannot force them to buy it.(8) The arguments boil down to a challenge of the scope of Congressional authority to regulate economic activity under the Commerce Clause. While other laws have been struck down before on Commerce Clause grounds,(9) they are the exception rather than the rule. As a result, it would be remarkable, in my view, for the Court to strike the law down. To do so, the Court would have to articulate a reason that the individual mandate beyond the reach of Congress’s authority, which is a feat made difficult by the Wickard decision and its progeny.
The views of this post do not necessarily reflect the views of Bryan Cave LLP or anyone other than the author.