Companies peg pay to health coverageAs health costs...


September 25, 1992|By Kim Clark

Companies peg pay to health coverage

As health costs continue to escalate, companies seek fairer ways to distribute the pain.

But some plans are being stymied by managers' unwillingness to require higher-paid employees -- including the managers themselves -- to shoulder higher costs.

Not at Black & Decker Corp. The Towson-based toolmaker has changed deductibles from a flat fee to a share of employees' salaries.

Some plans allow the workers to pay deductibles as low as 1 percent of their salaries. That means a $100,000-a-year executive would have to pay the first $1,000 of the annual health costs before insurance took over the bills. But a factory worker earning $20,000 a year would have to pay only the first $200 each year.

The deductible system, implemented in January 1991, hasn't saved Black & Decker any money, says benefits chief Ray Brusca. But it has made the insurance plans more equitable.

Black & Decker adopted a proportional deductible to "send a message" of fairness to its workers, he said.

"The concept is: The more you earn, the more you can afford," he says.

Mr. Brusca moved to Black & Decker three years ago from Primerica Corp., which had instituted a more far-ranging plan. At Primerica, the deductible and the employee's weekly health insurance contribution are based on salary.

But the two companies are at the leading edge, says Charles Offutt, principal in the Baltimore-based management consultants Bolton, Offutt, Donovan Inc.

Mr. Offutt says companies have accepted the premise of scaling benefits with salaries. But he has run into some resistance when trying to sell the idea of scaling contributions, too.

He points out that higher-paid employees tend to file more claims and so ought to pay a little more but says his pitches for fairness are "missionary work."

"I'm talking to the higher-paid people. This doesn't turn them on," he says.

Despite the resistance, Mr. Offutt continues to talk up the idea because "it is an emerging trend . . . and it makes all the sense in the world."

Dismissed workers win final paychecks

Dismissed GBS Corp. employees finally received their paychecks -- but only after hiring an attorney and taking the bankrupt financial-advice company and its new owner to court.

The pay dispute was one of the most unusual in years, says the workers' attorney, Andrew Toland.

When Leadley, Gunning & Culp International, a Canadian DTC competitor of GBS, bought the business of the ailing franchiser for $1.8 million in August, it closed the Columbia offices to most of GBS' old workers. And it said that since GBS no longer existed, they no longer had jobs.

Leadley managers told the stunned GBS workers to come back the next day with resumes and that the new company would decide whom to hire.

But when the workers came back for their paychecks, Robert Leadley, chairman of the new company, told The Sun his company didn't owe GBS workers any money.

And GBS' bankruptcy attorney said the old company wouldn't issue checks because Leadley had agreed to pay the workers.

According to recent settlements reached in bankruptcy court, the 35 discharged workers won't receive most of the vacation pay they are owed until the end of the year. And they won't get severance pay.

Mr. Toland says he has handled plenty of cases in which businesses have simply run out of money and are unable to pay their workers. But this was different.

"This was a premeditated action," he says.

Mr. Leadley didn't return phone calls this week asking for comment on the matter.

The workers were caught in the middle of the finger-pointing until Sept. 9, when their new attorney took their case to Bankruptcy Court Judge James Schneider, who was overseeing GBS.

Judge Schneider criticized GBS and Leadley representatives for allowing the workers to go unpaid and told the sides to work out a settlement.

Leadley agreed to pay salaries immediately and later said it couldn't afford to hand out most of the approximately $30,000 worth of accrued vacation pay until the end of the year.

Mr. Toland says he will ask Judge Schneider to make Leadley pay his attorney's fee, on grounds that the workers shouldn't have to pay to get what was owed them.

Smaller employers get withholding break

The Internal Revenue Service simplified its rules governing payroll taxes this week.

Starting Jan. 1, most employers will be permitted to deposit payroll taxes monthly.

Many employers currently must deposit taxes twice a week, and large employers will continue to have to do so.

But the new rules will allow any employer that withholds less than $50,000 a year to make a single monthly deposit.

Poll finds savings easier when forced

Most Americans prefer to be forced to save for their retirement.

In a survey, the Employee Benefit Research Institute, a non-profit think tank in Washington, found that more than seven out of 10 workers don't trust themselves to save for their own retirement. They would rather have employers withhold pay for them.

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